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Financial Stability as a Public Policy Goal to Increase Local Economic Development: an Empirical Investigation from Italian Labour Market Areas

Author

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  • BARRA, Cristian

    (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)

  • ZOTTI, Roberto

    (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)

Abstract

Financial stability is a prerequisite for sustainable economic development. Assuming that financial stability is a public good, with a negative effect on social welfare and on economic development when risks are not properly controlled, will make regulators ensuring the smooth functioning of the system, promoting regional development and making the health of the financial institutions. This paper contributes to the literature on the relationship between financial stability and growth within the regions of one country, implying that institutional, legal and cultural factors are more adequately controlled and financial markets more accurately bounded. Using a rich sample of Italian banks over the 2001–2012 period, the paper addresses whether different measures of financial distress affect economic development of labour market areas in Italy. Results show that financial stability has a positive effect on local economic development mainly explained by the bank’s return on average assets.

Suggested Citation

  • BARRA, Cristian & ZOTTI, Roberto, 2018. "Financial Stability as a Public Policy Goal to Increase Local Economic Development: an Empirical Investigation from Italian Labour Market Areas," CELPE Discussion Papers 154, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    • Handle: RePEc:sal:celpdp:0154
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    1. Durguti Esat A., 2020. "Challenges of Banking Profitability in Eurozone Countries: Analysis of Specific and Macroeconomic Factors," Naše gospodarstvo/Our economy, Sciendo, vol. 66(4), pages 1-10, December.

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    More about this item

    Keywords

    Banks; Local economic development; Financial stability; Labour market areas;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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