Banking regulation and the output cost of banking crises

Using a cross-section time-series of 47 banking crisis episodes in 35 industrial and emerging market economies between the 1970s and 2003, this study analyses the relationship between banking regulation and supervision, and the severity of banking crises measured in terms of the magnitude of output...

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Bibliographic Details
Published in:Journal of international financial markets, institutions & money institutions & money, 2009-04, Vol.19 (2), p.240-257
Main Author: Angkinand, Apanard P.
Format: Article
Language:English
Subjects:
Bank regulation
Banking crises
Banking crises Output cost Banking regulation Financial intermediation
Banking regulation
Banking system
Financial crisis
Financial intermediaries
Financial intermediation
Financial regulation
Output cost
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Summary:Using a cross-section time-series of 47 banking crisis episodes in 35 industrial and emerging market economies between the 1970s and 2003, this study analyses the relationship between banking regulation and supervision, and the severity of banking crises measured in terms of the magnitude of output loss. The empirical results show that countries that provide comprehensive deposit insurance coverage and enforce strict bank capital adequacy requirements experience a smaller output cost of crises. Restrictions on bank activities also influence the severity of crises. The results, however, do not suggest that there is a significant impact of bank supervision. In addition, there is no robust evidence that the magnitude of the output cost of crises depends on the extent of banks’ financial intermediation.
ISSN:1042-4431
1873-0612
DOI:10.1016/j.intfin.2007.12.001