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How does banking sector globalization affect economic growth?

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  • Ghosh, Amit

Abstract

The present study examines the impact of banking sector globalization on economic growth for a panel of 138 nations spanning 1995–2013. Employing different econometric models, the study finds greater banking sector openness to reduce economic growth. Such finding holds in both emerging markets and low income countries, and in nations with more than 10 percent foreign banks, but not in advanced economies. The paper also finds foreign banks reduce private credit flows in host nations. This implies foreign banks face informational bottlenecks that hinder them from lending to a large majority of potential client-base in host markets.

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  • Ghosh, Amit, 2017. "How does banking sector globalization affect economic growth?," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 83-97.
    • Handle: RePEc:eee:reveco:v:48:y:2017:i:c:p:83-97
    DOI: 10.1016/j.iref.2016.11.011
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    More about this item

    Keywords

    Foreign bank presence; Economic growth; Economic development; Panel data models; Bayesian analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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