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Measuring the Quality of Bank Regulation and Supervision, with an Application to Transition Economies

Author

Listed:
  • Bilin Neyapti

    (Bilkent University)

  • Nergiz Dincer

    (Bilkent University)

Abstract

This study develops a method to evaluate the quality of a legal framework for bank regulation and supervision (RS) by developing an extensive set of criteria and a coding system. Using this method, we generate an original set of measurements for RS by evaluating the letter of banking laws of 23 transition economies. In doing so, we also utilize the Basle guidelines on banking supervision and the related literature. The indices of RS indicate that legal banking reforms in Poland, Hungary and Estonia have been more ambitious than the rest of the countries in transition. In general, however, banking laws in transition economies indicate a lower regulatory and supervisory quality than indicated by the German banking law, if one is willing to choose the latter as a benchmark. This data set permits an empirical analysis of the relationship between legal RS and macroeconomic performance. The empirical evidence in the paper shows a significant positive relationship between RS and real GDP growth in transition economies.

Suggested Citation

  • Bilin Neyapti & Nergiz Dincer, 2004. "Measuring the Quality of Bank Regulation and Supervision, with an Application to Transition Economies," Working Papers 2004/2, Turkish Economic Association.
  • Handle: RePEc:tek:wpaper:2004/2
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    File URL: http://www.tek.org.tr/dosyalar/B-NEYAPTI-RSG-04-02.pdf
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    References listed on IDEAS

    as
    1. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-398, September.
    2. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 325-368, July.
    3. Demirguc-Kunt, Asli & Detragiache, Enrica, 2002. "Does deposit insurance increase banking system stability? An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1373-1406, October.
    4. Cukierman, Alex & Miller, Geoffrey P. & Neyapti, Bilin, 2002. "Central bank reform, liberalization and inflation in transition economies--an international perspective," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 237-264, March.
    5. Neyapti, Bilin, 2001. "Central bank independence and economic performance in eastern Europe," Economic Systems, Elsevier, vol. 25(4), pages 381-399, December.
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    Citations

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    Cited by:

    1. Nergiz Dincer & Bilin Neyapti, 2008. "WHAT DETERMINES THE "LEGAL" QUALITY Of BANK REGULATION AND SUPERVISION?," Contemporary Economic Policy, Western Economic Association International, vol. 26(4), pages 607-622, October.
    2. Iwasaki, Ichiro & Kumo, Kazuhiro, 2016. "Decline and Growth in Transition Economies: A Meta-Analysis," CEI Working Paper Series 2016-9, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    3. Tchana Tchana, Fulbert, 2014. "The empirics of banking regulation," Emerging Markets Review, Elsevier, vol. 19(C), pages 49-76.
    4. Andrew van Hulten & Michael Webber, 2010. "Do developing countries need 'good' institutions and policies and deep financial markets to benefit from capital account liberalization?," Journal of Economic Geography, Oxford University Press, vol. 10(2), pages 283-319, March.
    5. Sumru Altug & Bilin Neyapti & Mustafa Emin, 2012. "Institutions and Business Cycles," International Finance, Wiley Blackwell, vol. 15(3), pages 347-366, December.
    6. Puspa Amri & Apanard P. Angkinand & Clas Wihlborg, 2011. "International comparisons of bank regulation, liberalization, and banking crises," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(4), pages 322-339, November.
    7. Agapova, Anna & McNulty, James E., 2016. "Interest rate spreads and banking system efficiency: General considerations with an application to the transition economies of Central and Eastern Europe," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 154-165.
    8. Jakob Haan & Sander Oosterloo, 2006. "Transparency and accountability of central banks in their role of financial stability supervisor in OECD countries," European Journal of Law and Economics, Springer, vol. 22(3), pages 255-271, November.
    9. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Growth in Transition: A Meta-Analysis," William Davidson Institute Working Papers Series wp1057, William Davidson Institute at the University of Michigan.
    10. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Economic Growth: A Meta-Analysis," Working Papers 2013/08, Czech National Bank, Research Department.
    11. Jan Babecky & Tomas Havranek, 2014. "Structural reforms and growth in transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 22(1), pages 13-42, January.
    12. Neyapti, Bilin, 2013. "Modeling institutional evolution," Economic Systems, Elsevier, vol. 37(1), pages 1-16.
    13. Perera, Anil & Ralston, Deborah & Wickramanayake, J., 2014. "Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 195-216.
    14. Delis, Manthos D & Staikouras, Panagiotis, 2009. "On-site audits, sanctions, and bank risk-taking: An empirical overture towards a novel regulatory and supervisory philosophy," MPRA Paper 16836, University Library of Munich, Germany.
    15. Neyapti, Bilin & Arasil, Yavuz, 2016. "The nexus of economic and institutional evolution," Economic Modelling, Elsevier, vol. 52(PB), pages 574-582.
    16. Bilin Neyapti, 2010. "Macroeconomic Institutions and Development," Books, Edward Elgar Publishing, number 12960.
    17. Artur Radziwill & Pawel Smietanka, 2009. "EU's Eastern Neighbours: Institutional Harmonisation and Potential Growth Bonus," CASE Network Studies and Analyses 0386, CASE-Center for Social and Economic Research.
    18. Perera, Anil & Ralston, Deborah & Wickramanayake, Jayasinghe, 2013. "Central bank financial strength and inflation: Is there a robust link?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 399-414.

    More about this item

    Keywords

    Bank regulation and supervision; growth; transition economies;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G2 - Financial Economics - - Financial Institutions and Services
    • K29 - Law and Economics - - Regulation and Business Law - - - Other

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