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Financial Liberalization and Banking Crisis: A Spatial Panel Model

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  • Mohamed Bilel Triki
  • Samir Maktouf

Abstract

This paper investigates the determinants of banking system fragility by underlining the impact of bank liberalization on banking stability during the process of financial liberalization in emerging and developed countries. To this effect, we adopted a panel model with spatial dependency from a transmission channel points towards trade interactions to estimate the parameters of the model on a panel of 40 emerging and developed countries during 1989-2010. The empirical results suggest that financial liberalization has the tendency to stimulate the banking instability in economies. Financial liberalization played a significant role in the transmission of the 1996 to 2002 crisis to emerging market economies and also to American and European countries in 2007 crisis. However, credit growth, a negative GDP growth and a high real interest rate are on average the most important causes of a banking crisis. Besides we find that the impact of the determinants differ between whole, advanced economies and emerging economies.

Suggested Citation

  • Mohamed Bilel Triki & Samir Maktouf, 2012. "Financial Liberalization and Banking Crisis: A Spatial Panel Model," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(3), pages 1-5.
    • Handle: RePEc:spt:apfiba:v:2:y:2012:i:3:f:2_3_5
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    Cited by:

    1. Zhongbo Jing & J. Paul Elhorst & Jan P. A. M. Jacobs & Jakob Haan, 2018. "The propagation of financial turbulence: interdependence, spillovers, and direct and indirect effects," Empirical Economics, Springer, vol. 55(1), pages 169-192, August.
    2. Essid, Zina & Boujelbene, Younes & Plihon, Dominique, 2014. "Institutional quality and bank instability: cross-countries evidence in emerging countries," MPRA Paper 56251, University Library of Munich, Germany.
    3. Fernandes, Guilherme Barreto & Artes, Rinaldo, 2016. "Spatial dependence in credit risk and its improvement in credit scoring," European Journal of Operational Research, Elsevier, vol. 249(2), pages 517-524.
    4. Fernandes, Guilherme Barreto & Artes , Rinaldo, 2013. "Spatial correlation in credit risk and its improvement in credit scoring," Insper Working Papers wpe_321, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.

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