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Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis

  • Udaibir S Das
  • Marc G Quintyn
  • Kina Chenard

This paper provides empirical evidence that the quality of regulatory governance-governance practices adopted by financial system regulators and supervisors-matters for financial system soundness. The paper constructs indices of financial system soundness and regulatory governance, based on country data collected from the Financial Sector Assessment Program (FSAP). Regression results indicate that regulatory governance has a significant influence on financial system soundness, along with variables reflecting macroeconomic conditions, the structure of the banking system, and the quality of political institutions and public sector governance. The results also indicate that good public sector governance amplifies the impact of regulatory governance on financial system soundness.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/89.

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Length: 43
Date of creation: 01 May 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/89
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  1. International Monetary Fund, 2003. "Cross-Country and Cross-Sector Analysis of Transparency of Monetary and Financial Policies," IMF Working Papers 03/94, International Monetary Fund.
  2. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer, 2000. "Government Ownership of Banks," Harvard Institute of Economic Research Working Papers 1890, Harvard - Institute of Economic Research.
  3. Udaibir S Das & Marc G Quintyn, 2002. "Crisis Prevention and Crisis Management; The Role of Regulatory Governance," IMF Working Papers 02/163, International Monetary Fund.
  4. Marc Quintyn & Michael W. Taylor, 2003. "Regulatory and Supervisory Independence and Financial Stability," CESifo Economic Studies, CESifo, vol. 49(2), pages 259-294.
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  7. Udaibir S Das & Richard Podpiera & Nigel Davies, 2003. "Insurance and Issues in Financial Soundness," IMF Working Papers 03/138, International Monetary Fund.
  8. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany.
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  13. Christopher Kent & Guy Debelle, 1999. "Trends in the Australian Banking System: Implications for Financial System Stability and Monetary Policy," RBA Research Discussion Papers rdp1999-05, Reserve Bank of Australia.
  14. Richard Damania & Per Fredriksson & Muthukumara Mani, 2004. "The Persistence of Corruption and Regulatory Compliance Failures: Theory and Evidence," Public Choice, Springer, vol. 121(3), pages 363-390, February.
  15. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  16. Andrew G Haldane & Glenn Hoggarth & Victoria Saporta, 2001. "Assessing financial system stability, efficiency and structure at the Bank of England," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 138-159 Bank for International Settlements.
  17. R. B. Johnston & Liliana B Schumacher & Jingqing Chai, 2000. "Assessing Financial System Vulnerabilities," IMF Working Papers 00/76, International Monetary Fund.
  18. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Bank concentration and crises," Policy Research Working Paper Series 3041, The World Bank.
  19. Andrew D. Crockett, 1997. "Why is financial stability a goal of public policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-36.
  20. Garry J. Schinasi, 2003. "Responsibility of Central Banks for Stability in Financial Markets," IMF Working Papers 03/121, International Monetary Fund.
  21. John Chant & Alexandra Lai & Mark Illing & Fred Daniel, 2003. "Essays on Financial Stability," Technical Reports 95, Bank of Canada.
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