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Banking crises, regulation, and growth: the case of Russia

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  • Ulrich Thiessen

Abstract

Recent empirical analyses of the relationship between financial system development and economic growth find that financial system development causes economic growth, is a good predictor of growth and that its impact is relatively large. Moreover, the empirical literature predicts that the adverse effects of banking crises on economic growth will rise in the absence of an adequate response by the government. Hence, given the Russian government's failure to respond adequately to the 1998 banking crisis, Russia's strong economic growth since the crisis is a puzzle. This study uses simulations to conclude that the growth costs of the 1998 crisis were larger than previously suggested. The adverse effects were compensated by expansionary effects. The findings corroborate the importance of financial development in promoting growth in transition countries.

Suggested Citation

  • Ulrich Thiessen, 2005. "Banking crises, regulation, and growth: the case of Russia," Applied Economics, Taylor & Francis Journals, vol. 37(19), pages 2191-2203.
  • Handle: RePEc:taf:applec:v:37:y:2005:i:19:p:2191-2203
    DOI: 10.1080/00036840500330474
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    References listed on IDEAS

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    1. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    2. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series,in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
    3. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2004. "Financial development and economic growth: evidence from panel unit root and cointegration tests," Journal of Development Economics, Elsevier, vol. 73(1), pages 55-74, February.
    4. Hoggarth, Glenn & Reis, Ricardo & Saporta, Victoria, 2002. "Costs of banking system instability: Some empirical evidence," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 825-855, May.
    5. International Monetary Fund, 2002. "Russian Federation; Selected Issues," IMF Staff Country Reports 02/75, International Monetary Fund.
    6. Sheila A. Chapman & Marcella Mulino, 2000. "Explaining Russia's Currency and Financial Crises," Working Papers 59, Sapienza University of Rome, CIDEI.
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    Cited by:

    1. Hasanov, Fakhri & Huseynov, Fariz, 2013. "Bank credits and non-oil economic growth: Evidence from Azerbaijan," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 597-610.

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