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On the Design of Public Institutions: Evidence from Financial Supervision

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  • Nitsch, Volker

Abstract

This paper studies the allocation of the functions and responsibilities of prudential supervision on public authorities, including the central bank. In particular, it is argued that there are interdependencies in the design of institutions; political decisions on the supervisory structure are not taken in isolation. Analyzing a panel data set of prudential supervision regimes in 98 countries over the period from 1999 to 2010, I find that central banks play a smaller role in supervision and tasks are more decentralized if the central bank is independent and transparent. Measures of firm and fiscal decentralization are typically associated with a greater centralization of supervisory functions outside of the central bank.

Suggested Citation

  • Nitsch, Volker, 2014. "On the Design of Public Institutions: Evidence from Financial Supervision," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 79451, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:79451
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/79451/
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    References listed on IDEAS

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    1. Charles A. E. Goodhart, 1995. "The Central Bank and the Financial System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262071673, December.
    2. N. Nergiz Dincer & Barry Eichengreen, 2014. "Central Bank Transparency and Independence: Updates and New Measures," International Journal of Central Banking, International Journal of Central Banking, vol. 10(1), pages 189-259, March.
    3. de Luna Martinez, Jose & Rose, Thomas A., 2003. "International survey of integrated financial sector supervision," Policy Research Working Paper Series 3096, The World Bank.
    4. C. A. E. Goodhart, 1995. "The Central Bank and the Financial System," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-37915-2.
    5. Dalla Pellegrina, L. & Masciandaro, D. & Pansini, R.V., 2013. "The central banker as prudential supervisor: Does independence matter?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 415-427.
    6. Donato Masciandaro & Mr. Marc G Quintyn & Mr. Michael W Taylor, 2008. "Financial Supervisory Independence and Accountability–Exploring the Determinants," IMF Working Papers 2008/147, International Monetary Fund.
    7. N. Nergiz Dincer & Barry Eichengreen, 2012. "The Architecture and Governance of Financial Supervision: Sources and Implications," International Finance, Wiley Blackwell, vol. 15(3), pages 309-325, December.
    8. Caprio, Gerard & D’Apice, Vincenzo & Ferri, Giovanni & Puopolo, Giovanni Walter, 2014. "Macro-financial determinants of the great financial crisis: Implications for financial regulation," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 114-129.
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    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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