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Financial liberalization, disaggregated capital flows and banking crisis: Evidence from developing countries

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  • Hamdi, Helmi
  • Jlassi, Nabila Boukef

Abstract

The aim of this paper is to examine whether financial liberalization has triggered banking crises in some developing countries. We focus in particular on the role of capital flows as their volatilities threat economic stability and growth. In the empirical model, based on panel logit estimation, we use the two common financial liberalization indicators (defacto and dejure) for a panel of 58 developing countries observed during the period 1984–2007. Unlike the previous studies, this paper reveals that both indicators of financial liberalization did not trigger banking crises. However, the results show that foreign debt liabilities to total liabilities and foreign direct investment liabilities to total liabilities increase the likelihood of banking crises.

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  • Hamdi, Helmi & Jlassi, Nabila Boukef, 2014. "Financial liberalization, disaggregated capital flows and banking crisis: Evidence from developing countries," Economic Modelling, Elsevier, vol. 41(C), pages 124-132.
    • Handle: RePEc:eee:ecmode:v:41:y:2014:i:c:p:124-132
    DOI: 10.1016/j.econmod.2014.05.010
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    More about this item

    Keywords

    Banking crises; Financial liberalization; Capital FLOWS; Developing countries;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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