Banking stability,competition, and economic volatility |
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| Institution: | 1. CUNEF, Department of Finance, Leonardo Prieto Castro 2, Ciudad Universitaria, 28040 Madrid, Spain;2. University of Oviedo, School of Economics and Business, Avenida del Cristo S/N, 33071 Oviedo, Spain;1. Warsaw School of Economics, Al. Niepodleg?o?ci 162, 02–554 Warszawa, Poland;2. Narodowy Bank Polski, Poland;1. School of Economics and Finance, Xi’an Jiaotong University, Xi’an, Shaanxi, PR China;2. Xi’an Branch, The People''s Bank of China, Xi’an, Shaanxi, PR China;1. School of Accounting, Financial Services and Law, Edinburgh Napier University, Edinburgh EH14 1DJ, United Kingdom;2. Department of Accounting, Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur 50603, Malaysia;1. University of Groningen, Faculty of Economics and Business, Department of Economics, Econometrics and Finance, P.O. Box 800, 9700 AV Groningen, The Netherlands;2. University of Wyoming, Department of Economics and Finance (Dept. 3985), 1000 East University Ave., Laramie, WY 82071, USA;3. Centre for Applied Macroeconomic Analysis (CAMA), Australian National University, Australia;1. Center for Institutional Studies, National Research University Higher School of Economics, Russian Federation;2. Center for Institutional Studies and Department of Finance, National Research University Higher School of Economics, Russian Federation |
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| Abstract: | The paper analyzes the influence of banking stability on the volatility of industrial value added using data for 110 countries. Our results confirm the relevance of lending and asset allocation effects because banking stability reduces the volatility of value added more in industries that have greater external financial dependence and intangible intensity when they are located in countries with more developed financial and institutional systems. Moreover, banking stability helps reduce economic volatility more in countries with less bank market competition. We control for recessions, reverse causality problems, and endogeneity of banking stability. |
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| Keywords: | Banking stability Competition Economic volatility Regulations |
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