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Government Ownership of Banks, Institutions and Economic Growth

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  • Svetlana Andrianova

    ()

  • Panicos Demetriades

    ()

  • Anja Shortland

    ()

Abstract

We put forward a modern version of the ‘developmental’ view of government-owned banks which shows that the combination of information asymmetries and weak institutions creates scope for such banks to play a growth-promoting role. We present new cross-country evidence consistent with our theoretical predictions. Specifically, we show that during 1995–2007 government ownership of banks has been robustly associated with higher long run growth rates. Moreover, we show that previous results suggesting that government ownership of banks is associated with lower long run growth rates are not robust to conditioning on more ‘fundamental’ determinants of economic growth.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 11/01.

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Date of creation: Sep 2010
Date of revision: Oct 2010
Handle: RePEc:lec:leecon:11/01

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Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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Keywords: Public banks; economic growth; quality of governance; regulation;

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Cited by:
  1. Michiel Bijlsma & Andrei Dubovik, 2014. "Banks, Financial Markets and Growth in Developed Countries: a Survey of the empirical literature," CPB Discussion Paper 266, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Andrianova, Svetlana, 2012. "Public banks and financial stability," Economics Letters, Elsevier, vol. 116(1), pages 86-88.
  3. Ayadi, Rym & Arbak, Emrah & De Groen, Willem Pieter, 2013. "Convergence and Integration of Banking Sector Regulations in the Euro-Mediterranean area," CEPS Papers 7853, Centre for European Policy Studies.
  4. Pasali, Selahattin Selsah, 2013. "Where is the cheese ? synthesizing a giant literature on causes and consequences of financial sector development," Policy Research Working Paper Series 6655, The World Bank.
  5. Ugo Panizza, 2013. "Financial Development and Economic Growth: Known Knowns, Known Unknowns, and Unknown Unknowns," IHEID Working Papers 14-2013, Economics Section, The Graduate Institute of International Studies.
  6. Ang, James B. & Kumar, Sanjesh, 2014. "Financial development and barriers to the cross-border diffusion of financial innovation," Journal of Banking & Finance, Elsevier, vol. 39(C), pages 43-56.

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