Banking regulation and the output cost of banking crises |
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| Authors: | Apanard P. Angkinand |
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| Affiliation: | 1. University of Magdeburg, Germany;2. IWH Halle, Germany;3. CESifo, Germany;4. Deutsche Bundesbank, Germany;1. Pamplin College of Business, Virginia Tech, Falls Church, VA 22043, United States;2. World Bank, 1818 H. St. MC 3-445, Washington, DC 20433, United States;3. City University of Hong Kong, AC3-13-247 83 Tat Chee Avenue, Kowloon, Hong Kong;1. Faculty of Economics, University of Rome III, Italy;2. Bangor Business School, Bangor University, UK;3. Business School, The University of Edinburgh, 29 Buccleuch Place, Edinburgh EH8 9JS, UK;1. LEMNA, University of Nantes, IEMN–IAE, Chemin de la Censive du Tertre, BP 52231, 44322 Nantes, France;2. PSB Paris School of Business, Department of Economics, 59 rue Nationale, 75013 Paris, France;1. World Bank, 1818 H Street, N.W., Washington, DC 20433, United States;2. Boston College and NBER, 2325 E Calle Los Altos, Tucson, AZ 85718-2064, United States;3. European Central Bank and CEPR, Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany;1. Minos A. Zombanakis Professor of the International Financial System, Kennedy School of Government, Harvard University, 79 JFK Street, Cambridge, MA 02138, United States;2. Thomas D. Cabot Professor of Public Policy, Economics Department, Littauer Center 216, Harvard University, Cambridge, MA 02138-3001, United States |
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| Abstract: | 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. |
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