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Institutions, Policy and Banking Sector Development: A Reassessment

Author

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  • Ioannis FILIPPIDIS

    (Department of Economics, Aristotle University of Thessaloniki, Greece)

  • Constantinos KATRAKILIDIS

    (Department of Economics, Aristotle University of Thessaloniki, Greece)

Abstract

This paper investigates the links between institutional quality and government policy in banking sector development, using data from 80 low-, middle- and high-income economies during 1985–2007. In order to investigate the effect of economic, political and social institutions on bank-based development, we employ dynamic panel techniques and, more specifically, the system-GMM estimator, which controls for endogeneity among variables. The results demonstrate that: i) economic institutional quality, and especially the legal dimension, is the main determinant for banking sector development; ii) social institutions have a greater impact for low- and middle-income countries, while political institutions have a greater impact for high-income countries; and iii) government policy, in terms of government size, is crucial regardless of the stage of economic development.

Suggested Citation

  • Ioannis FILIPPIDIS & Constantinos KATRAKILIDIS, 2014. "Institutions, Policy and Banking Sector Development: A Reassessment," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(6), pages 501-521, December.
    • Handle: RePEc:fau:fauart:v:64:y:2014:i:6:p:501-521
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    2. Ongo Nkoa, Bruno Emmanuel & Song, Jacques Simon, 2020. "Does institutional quality affect financial inclusion in Africa? A panel data analysis," Economic Systems, Elsevier, vol. 44(4).
    3. Biliqees Ayoola Abdulmumin & Oyebola Fatima Etudaiye-Muhtar & Abdulrasaq Taiye Jimoh & Ola Ridwan Sakariyahu, 2019. "An Investigation into the Level of Financial Inclusion in Sub-Saharan Africa," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 66(1), pages 41-63, March.
    4. Olufemi Adewale Aluko & Muazu Ibrahim, 2020. "On the macroeconomic determinants of financial institutions development in sub-Saharan Africa," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(1), pages 69-85, March.
    5. Nasreen, Samia & Mahalik, Mantu Kumar & Shahbaz, Muhammad & Abbas, Qaisar, 2020. "How do financial globalization, institutions and economic growth impact financial sector development in European countries?," Research in International Business and Finance, Elsevier, vol. 54(C).
    6. Ofori, Isaac K. & Quaidoo, Christopher & Ofori, Pamela E., 2021. "What Drives Financial Sector Development in Africa? Insights from Machine Learning," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.

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    More about this item

    Keywords

    banking sector development; institutions; trade openness; size of government; panel data analysis;
    All these keywords.

    JEL classification:

    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • F19 - International Economics - - Trade - - - Other
    • K49 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Other

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