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Role of financial regulation and innovation in the financial crisis

Listed author(s):
  • Kim, Teakdong
  • Koo, Bonwoo
  • Park, Minsoo

Using the financial and macroeconomic dataset of 132 countries, this study empirically analyzes the effects of financial regulations and innovations on the global financial crisis. It shows that regulatory measures such as restrictions on bank activities and entry requirements have decreased the likelihood of a banking crisis, while capital regulation and government ownership of banks have increased the likelihood of a currency crisis. Financial innovation has contributed to the banking crisis but contained the currency crisis. This study also shows that judicious implementation of regulatory measures is critical to financial stability because some regulations, if implemented simultaneously, can further aggravate or alleviate a crisis.

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File URL: http://www.sciencedirect.com/science/article/pii/S1572308912000472
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Article provided by Elsevier in its journal Journal of Financial Stability.

Volume (Year): 9 (2013)
Issue (Month): 4 ()
Pages: 662-672

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Handle: RePEc:eee:finsta:v:9:y:2013:i:4:p:662-672
DOI: 10.1016/j.jfs.2012.07.002
Contact details of provider: Web page: http://www.elsevier.com/locate/jfstabil

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