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Macro Financial Determinants of the Great Financial Crisis: Implications for Financial Regulation

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  • Caprio, Gerard Jr.
  • D'Apice, Vincenzo
  • Ferri, Giovanni
  • Puopolo, Giovanni Walter

Abstract

By analysing the macro financial determinants of the Great Financial Crisis of 2007-2009 on 83 countries, we find that the probability of suffering the crisis in 2008 was larger for countries having higher levels of credit deposit ratio whereas it was lower for countries having higher levels of: i) net interest margin, ii) concentration in the banking sector, iii) restrictions to bank activities, iv) private monitoring. Our findings contribute to the ongoing discussion that can help policymakers calibrate new regulation, by achieving a reasonable trade-off between financial stability and economic growth.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26088.

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Date of creation: 21 Oct 2010
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Publication status: Published in Temi di Economia e Finanza Special Issue.1(2010): pp. 1-31
Handle: RePEc:pra:mprapa:26088

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Keywords: Banking Crisis; Government Intervention; Regulation;

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References

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  1. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 143-197, June.
  2. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
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  4. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2006. "Bank concentration, competition, and crises: First results," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(5), pages 1581-1603, May.
  5. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 949-995, October.
  6. John H. Boyd & Gianni De Nicolã, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, American Finance Association, vol. 60(3), pages 1329-1343, 06.
  7. Luc Laeven & Fabian Valencia, 2010. "Resolution of Banking Crises," IMF Working Papers 10/146, International Monetary Fund.
  8. Gerard Caprio, Jr. Williams College, 2009. "Financial Regulation in a Changing World: Lessons from the Recent Crisis," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp308, IIIS.
  9. Alesina, Alberto, et al, 2003. " Fractionalization," Journal of Economic Growth, Springer, Springer, vol. 8(2), pages 155-94, June.
  10. Wei, Shang-Jin, 2006. "Connecting two views on financial globalization: Can we make further progress?," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 459-481, December.
  11. Barth, James R. & Caprio Jr., Gerard & Levine, Ross, 2001. "Bank regulation and supervision : what works best?," Policy Research Working Paper Series 2725, The World Bank.
  12. Laeven, Luc & Levine, Ross, 2009. "Bank governance, regulation and risk taking," Journal of Financial Economics, Elsevier, Elsevier, vol. 93(2), pages 259-275, August.
  13. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2006. "Financial Globalization," IMF Working Papers 06/189, International Monetary Fund.
  14. Paolo Mauro & André Faria, 2004. "Institutions and the External Capital Structure of Countries," IMF Working Papers 04/236, International Monetary Fund.
  15. Mark M Spiegel, 2009. "Financial Globalization and Monetary Policy Discipline: A Survey With New Evidence from Financial Remoteness," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 198-221, April.
  16. Choudhry Tanveer Shehzad & Jakob de Haan, 2009. "Financial Reform and Banking Crises," CESifo Working Paper Series 2870, CESifo Group Munich.
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Citations

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Cited by:
  1. Agnès Bénassy-Quéré & Guillaume Roussellet, 2012. "Fiscal Sustainability in the Presence of Systemic Banks: the Case of EU Countries," PSE - G-MOND WORKING PAPERS, HAL hal-00962455, HAL.
  2. Feldkircher, Martin, 2014. "The determinants of vulnerability to the global financial crisis 2008 to 2009: Credit growth and other sources of risk," Journal of International Money and Finance, Elsevier, Elsevier, vol. 43(C), pages 19-49.
  3. Agnès Bénassy-Quéré & Guillaume Roussellet, 2014. "Fiscal Sustainability in the Presence of Systemic Banks: the Case of EU countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00825256, HAL.
  4. Josef Schreiner, 2012. "Developments in Selected CESEE Countries: Heterogeneous Growth Performance, Improving Fiscal and External Accounts," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 8-37.
  5. Donato Masciandaro & Marc Quintyn, 2013. "The Evolution of Financial Supervision: the Continuing Search for the Holy Grail," SUERF 50th Anniversary Volume Chapters, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  6. Stolbov, Mikhail, 2013. "Anatomy of international banking crises at the onset of the Great Recession," MPRA Paper 51236, University Library of Munich, Germany.
  7. Lee, Tung-Hao & Chih, Shu-Hwa, 2013. "Does financial regulation affect the profit efficiency and risk of banks? Evidence from China's commercial banks," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 26(C), pages 705-724.
  8. Marc Quintyn & Rosaria Vega Pansini & Donato Masciandaro, 2011. "The Economic Crisis," IMF Working Papers 11/261, International Monetary Fund.
  9. Jesús Crespo Cuaresma & Martin Feldkircher, 2012. "Drivers of Output Loss during the 2008–09 Crisis: A Focus on Emerging Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 46-64.
  10. Silvio Contessi & Pierangelo De Pace & Massimo Guidolin, 2013. "How did the financial crisis alter the correlations of U.S. yield spreads?," Working Papers, Federal Reserve Bank of St. Louis 2013-005, Federal Reserve Bank of St. Louis.

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