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Banking stability, competition, and economic volatility

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  • Fernández, Ana I.
  • González, Francisco
  • Suárez, Nuria

Abstract

The paper analyzes the influence of banking stability on the volatility of industrial value added using data for 110 countries. Our results confirm the relevance of lending and asset allocation effects because banking stability reduces the volatility of value added more in industries that have greater external financial dependence and intangible intensity when they are located in countries with more developed financial and institutional systems. Moreover, banking stability helps reduce economic volatility more in countries with less bank market competition. We control for recessions, reverse causality problems, and endogeneity of banking stability.

Suggested Citation

  • Fernández, Ana I. & González, Francisco & Suárez, Nuria, 2016. "Banking stability, competition, and economic volatility," Journal of Financial Stability, Elsevier, vol. 22(C), pages 101-120.
  • Handle: RePEc:eee:finsta:v:22:y:2016:i:c:p:101-120
    DOI: 10.1016/j.jfs.2016.01.005
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    Cited by:

    1. repec:bla:ecnote:v:46:y:2017:i:3:p:649-676 is not listed on IDEAS
    2. Anh The Vo & Loan Thi-Hong Van & Duc Hong Vo & Michael Mcaleer, 2019. "Financial Inclusion And Macroeconomic Stability In Emerging And Frontier Markets," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 14(02), pages 1-15, June.
    3. repec:eee:jebusi:v:96:y:2018:i:c:p:15-41 is not listed on IDEAS

    More about this item

    Keywords

    Banking stability; Competition; Economic volatility; Regulations;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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