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Government Ownership of Banks, Institutions, and Financial Development

  • Svetlana Andrianova

    (University of Leicester)

  • Panicos Demetriades

    (University of Leicester)

  • Anja Shortland

    (University of Leicester)

Using a suitably modified locational model of banking, we examine the influence of institutions, such as deposit contract enforcement, in explaining the share of government owned banks in the banking system. We present cross-country evidence suggesting that institutional factors are relatively more important determinants of the share of state banks than political or historical ones. We argue that rather than privatizing or subsidizing state banks governments in developing countries should build institutions that foster the development of private banking.

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Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0011.

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Date of creation: Aug 2006
Date of revision:
Handle: RePEc:wef:wpaper:0011
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  1. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
  2. Erik Berglof & Patrick Bolton, 2001. "The Great Divide and Beyond: Financial Architecture in Transition," William Davidson Institute Working Papers Series 414, William Davidson Institute at the University of Michigan.
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  4. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001. "Government Ownership of Banks," Working Paper Series rwp01-016, Harvard University, John F. Kennedy School of Government.
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  8. Rioja, Felix & Valev, Neven, 2004. "Does one size fit all?: a reexamination of the finance and growth relationship," Journal of Development Economics, Elsevier, vol. 74(2), pages 429-447, August.
  9. Reinhart, Carmen & Kaminsky, Graciela, 2000. "Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
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  10. George A. Akerlof & Paul M. Romer, 1993. "Looting: The Economic Underworld of Bankruptcy for Profit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 1-74.
  11. Panicos Demetriades & Svetlana Andrianova, . "Finance and Growth: What We Know and What We Need To Know," Discussion Papers in Economics 03/15, Department of Economics, University of Leicester.
  12. Barth, James R. & Caprio Jr, Gerard & Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
  13. Barth, James R. & Caprio, Gerard & Levine, Ross, 2000. "Banking systems around the globe : do regulation and ownership affect the performance and stability?," Policy Research Working Paper Series 2325, The World Bank.
  14. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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