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The role of the government in financial sector development

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  • Cooray, Arusha

Abstract

This study examines the impact of two dimensions of the government, namely, size and quality, on two dimensions of the financial sector, size and efficiency, in a cross section of 71 economies. The study finds that increased quality of the government as measured by governance and legal origin positively influences both financial sector size and efficiency. The size of the government proxied by government expenditure and the government ownership of banks has a negative effect on financial sector efficiency, and a positive impact on financial sector size, particularly in the low income economies.

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File URL: http://www.sciencedirect.com/science/article/B6VB1-51M593N-4/2/fd23e60eb3af3148406c31294463aa61
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 3 (May)
Pages: 928-938

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:928-938
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

Keywords: Financial sector size Financial sector efficiency Government size Government efficiency Government ownership of banks Governance Legal origin Cross country;

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Cited by:

  1. Anwar, Sajid & Cooray, Arusha, 2012. "Financial development, political rights, civil liberties and economic growth: Evidence from South Asia," Economic Modelling, Elsevier, vol. 29(3), pages 974-981.
  2. Ayadi, Rym & Arbak, Emrah & Ben-Naceur, Sami & De Groen, Willem Pieter, 2013. "Benchmarking the Financial Sector in the Southern and Eastern Mediterranean Countries and Projecting 2030 Financial Sector Scenarios," CEPS Papers 7868, Centre for European Policy Studies.
  3. Anis Omri & Amel Sassi-Tmar, 2014. "Linking FDI inflows to economic growth in North African countries," Working Papers 2014-558, Department of Research, Ipag Business School.
  4. Anwar, Sajid & Sun, Sizhong, 2011. "Financial development, foreign investment and economic growth in Malaysia," Journal of Asian Economics, Elsevier, vol. 22(4), pages 335-342, August.

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