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Did financial liberalization lead to bank fragility? Evidence from Tunisia

Author

Listed:
  • Hamdi, Helmi
  • Hakimi, Abdelaziz
  • Djelassi, Mouldi

Abstract

The debate on the effects of financial liberalization on banking sector is far from being conclusive. In fact, financial liberalization is recommended by some scholars on the one hand and it is not supported by some others in the other hand. In this confused situation, it is so interesting to study the consequences of the introduction of financial liberalization program on the Tunisian banking sector in order to evaluate the country’s experience. To reach this goal, we collected date related to 9 banks observed for the period of 1980-2009. By using a Seemingly Unrelated Regression (SUR), our estimation shows that financial liberalization affected negatively the profitability of Tunisian banks and increased the degree of credit risk. Empirical results show, however, that financial liberalization increased significantly the liquidity of banks, tanks to liberalization of deposit interest rates and the accumulation of capital inflows from international companies.

Suggested Citation

  • Hamdi, Helmi & Hakimi, Abdelaziz & Djelassi, Mouldi, 2013. "Did financial liberalization lead to bank fragility? Evidence from Tunisia," MPRA Paper 65075, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65075
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    References listed on IDEAS

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    1. Loayza, Norman V. & Ranciere, Romain, 2006. "Financial Development, Financial Fragility, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 1051-1076, June.
    2. Hakimi Abdelaziz & Djelassi Mouldi & Hamdi Helmi, 2011. "Financial Liberalization and Banking Profitability: A Panel Data Analysis for Tunisian Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 1(2), pages 19-32, June.
    3. repec:rnp:ecopol:09111 is not listed on IDEAS
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    8. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
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    Cited by:

    1. Helmi Hamdi, 2015. "Financial Reform and Economic Development," Economies, MDPI, vol. 3(4), pages 1-2, December.
    2. Hakimi, Abdelaziz & Hamdi, Helmi, 2013. "Credit Information, Guarantees and Non-Performing Loans," MPRA Paper 55750, University Library of Munich, Germany, revised 2014.
    3. Rachdi, Houssem & Hakimi, Abdelaziz & Hamdi, Helmi, 2018. "Liberalization, crisis and growth in MENA region: Do institutions matter?," Journal of Policy Modeling, Elsevier, vol. 40(4), pages 810-826.
    4. Hakimi, Abdelaziz & Hamdi, Helmi & Djlassi, Mouldi, 2013. "Testing the concentration-performance relationship in the Tunisian banking sector," MPRA Paper 55927, University Library of Munich, Germany, revised 2013.
    5. Rui Wang & Hang (Robin) Luo, 2019. "Does Financial Liberalization Affect Bank Risk-Taking in China?," SAGE Open, , vol. 9(4), pages 21582440198, November.
    6. Hamdi, Helmi & Jlassi, Nabila Boukef, 2014. "Financial liberalization, disaggregated capital flows and banking crisis: Evidence from developing countries," Economic Modelling, Elsevier, vol. 41(C), pages 124-132.
    7. RACHDI, Houssem & Hakimi, Abdelaziz & Hamdi, Helmi, 2015. "Financial Liberalization, Banking Crisis and Economic Growth in MENA Region: Do Institutions Matter?," MPRA Paper 64562, University Library of Munich, Germany.

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    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F6 - International Economics - - Economic Impacts of Globalization
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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