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Taming financial development to reduce crises

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  • Naceur, Sami Ben
  • Candelon, Bertrand
  • Lajaunie, Quentin
Abstract
This paper assesses whether and how financial development triggers the occurrence of banking crises. It builds on a database that includes financial development as well as financial access, depth and efficiency for almost 100 countries. Through estimation of a dynamic logit panel model, it appears that financial development, from an institutional dimension and to a lesser extent from a market dimension, triggers financial instability within a one- to two-year horizon. Additionally, whereas financial access is destabilizing for advanced countries, it is stabilizing for emerging and low income ones. Both results have important implications for macroprudential policies and financial regulations.
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  • Naceur, Sami Ben & Candelon, Bertrand & Lajaunie, Quentin, 2019. "Taming financial development to reduce crises," LIDAM Reprints LFIN 2019005, Université catholique de Louvain, Louvain Finance (LFIN).
    • Handle: RePEc:ajf:louvlr:2019005
    Note: In : Emerging Markets Review, Vol. 40, no. 100618 (2019)
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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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