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Does the size and quality of the government explain the size and efficiency of the financial sector?

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  • Arusha Cooray

Abstract

This study examines the impact of two dimensions of the government, namely, size and quality, on two dimensions of the financial sector, size and efficiency, in a cross section of 71 economies. The study finds that while increased quality of the government as measured by governance and legal origin positively influence both financial sector size and efficiency, that the size of the government proxied by government expenditure and government ownership of banks, has a negative effect on financial sector efficiency, however, a positive impact on financial sector size, particularly in the low income economies.

Suggested Citation

  • Arusha Cooray, 2010. "Does the size and quality of the government explain the size and efficiency of the financial sector?," CAMA Working Papers 2010-32, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2010-32
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-06/32_cooray_2010.pdf
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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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