IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/65075.html
   My bibliography  Save this paper

Did financial liberalization lead to bank fragility? Evidence from Tunisia

Author

Listed:
  • Hamdi, Helmi
  • Hakimi, Abdelaziz
  • Djelassi, Mouldi

Abstract

The debate on the effects of financial liberalization on banking sector is far from being conclusive. In fact, financial liberalization is recommended by some scholars on the one hand and it is not supported by some others in the other hand. In this confused situation, it is so interesting to study the consequences of the introduction of financial liberalization program on the Tunisian banking sector in order to evaluate the country’s experience. To reach this goal, we collected date related to 9 banks observed for the period of 1980-2009. By using a Seemingly Unrelated Regression (SUR), our estimation shows that financial liberalization affected negatively the profitability of Tunisian banks and increased the degree of credit risk. Empirical results show, however, that financial liberalization increased significantly the liquidity of banks, tanks to liberalization of deposit interest rates and the accumulation of capital inflows from international companies.

Suggested Citation

  • Hamdi, Helmi & Hakimi, Abdelaziz & Djelassi, Mouldi, 2013. "Did financial liberalization lead to bank fragility? Evidence from Tunisia," MPRA Paper 65075, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65075
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/65075/1/MPRA_paper_65075.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Loayza, Norman V. & Ranciere, Romain, 2006. "Financial Development, Financial Fragility, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 1051-1076, June.
    2. Hakimi Abdelaziz & Djelassi Mouldi & Hamdi Helmi, 2011. "Financial Liberalization and Banking Profitability: A Panel Data Analysis for Tunisian Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 1(2), pages 19-32, June.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    4. William C. Gruben & Jahyeong Koo & Robert R. Moore, 1999. "When does financial liberalization make banks risky? : an empirical examination of Argentina, Canada and Mexico," Center for Latin America Working Papers 0399, Federal Reserve Bank of Dallas.
    5. Abiad, Abdul & Oomes, Nienke & Ueda, Kenichi, 2008. "The quality effect: Does financial liberalization improve the allocation of capital?," Journal of Development Economics, Elsevier, vol. 87(2), pages 270-282, October.
    6. Anusha Chari & Peter Blair Henry, 2002. "Capital Account Liberalization: Allocative Efficiency or Animal Spirits?," NBER Working Papers 8908, National Bureau of Economic Research, Inc.
    7. Vicente Galbis, 1993. "High Real Interest Rates Under Financial Liberalization: Is there a Problem?," IMF Working Papers 1993/007, International Monetary Fund.
    8. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
    9. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    10. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Chapter 1," MPRA Paper 17452, University Library of Munich, Germany.
    11. William C. Gruben & Jahyeong Koo & Robert R. Moore, 2003. "Financial liberalization, market discipline and bank risk," Center for Latin America Working Papers 0303, Federal Reserve Bank of Dallas.
    12. Abdul Abiad & Enrica Detragiache & Thierry Tressel, 2010. "A New Database of Financial Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 281-302, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Helmi Hamdi, 2015. "Financial Reform and Economic Development," Economies, MDPI, vol. 3(4), pages 1-2, December.
    2. Hakimi, Abdelaziz & Hamdi, Helmi, 2013. "Credit Information, Guarantees and Non-Performing Loans," MPRA Paper 55750, University Library of Munich, Germany, revised 2014.
    3. 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.
    4. Rachdi, Houssem & Hakimi, Abdelaziz & Hamdi, Helmi, 2018. "Liberalization, crisis and growth in MENA region: Do institutions matter?," Journal of Policy Modeling, Elsevier, vol. 40(4), pages 810-826.
    5. Hakimi, Abdelaziz & Hamdi, Helmi & Djlassi, Mouldi, 2013. "Testing the concentration-performance relationship in the Tunisian banking sector," MPRA Paper 55927, University Library of Munich, Germany, revised 2013.
    6. Rui Wang & Hang (Robin) Luo, 2019. "Does Financial Liberalization Affect Bank Risk-Taking in China?," SAGE Open, , vol. 9(4), pages 21582440198, November.
    7. RACHDI, Houssem & Hakimi, Abdelaziz & Hamdi, Helmi, 2015. "Financial Liberalization, Banking Crisis and Economic Growth in MENA Region: Do Institutions Matter?," MPRA Paper 64562, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cesa-Bianchi, Ambrogio & Eguren Martin, Fernando & Thwaites, Gregory, 2019. "Foreign booms, domestic busts: The global dimension of banking crises," Journal of Financial Intermediation, Elsevier, vol. 37(C), pages 58-74.
    2. Akhilesh K. Verma & Rajeswari Sengupta, 2021. "Interlinkages between external debt financing, credit cycles and output fluctuations in emerging market economies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(4), pages 965-1001, November.
    3. Davis, J. Scott & Mack, Adrienne & Phoa, Wesley & Vandenabeele, Anne, 2016. "Credit booms, banking crises, and the current account," Journal of International Money and Finance, Elsevier, vol. 60(C), pages 360-377.
    4. Norman Loayza & Amine Ouazad & Romain Ranciere, 2017. "Financial Development, Growth, and Crisis: Is There a Trade-Off?," Working Papers 114, Peruvian Economic Association.
    5. Gertler, Pavel & Hofmann, Boris, 2018. "Monetary facts revisited," Journal of International Money and Finance, Elsevier, vol. 86(C), pages 154-170.
    6. Luintel, Kul B & Li, GuangJie & Khan, Mosahid, 2023. "Finance And Growth: The Unpleasant Burden Of Evidence," Cardiff Economics Working Papers E2023/8, Cardiff University, Cardiff Business School, Economics Section.
    7. Beck, T.H.L., 2011. "The Role of Finance in Economic Development : Benefits, Risks, and Politics," Discussion Paper 2011-141, Tilburg University, Center for Economic Research.
    8. Paolo Mauro & Jing Zhou, 2021. "$$r-g," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(1), pages 197-229, March.
    9. Manuel Funke & Moritz Schularick & Christoph Trebesch, 2023. "Populist Leaders and the Economy," American Economic Review, American Economic Association, vol. 113(12), pages 3249-3288, December.
    10. Christoph Trebesch, 2019. "Resolving sovereign debt crises: the role of political risk," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 421-444.
    11. Röhrs, Sigrid & Winter, Christoph, 2017. "Reducing government debt in the presence of inequality," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 1-20.
    12. Thanh C. Nguyen & Vítor Castro & Justine Wood, 2022. "Political environment and financial crises," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 417-438, January.
    13. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    14. Jonathon Adams‐Kane & Julián A. Caballero & Jamus Jerome Lim, 2017. "Foreign Bank Behavior during Financial Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(2-3), pages 351-392, March.
    15. Antonio Afonso & Jose Alves, 2015. "The Role of Government Debt in Economic Growth," Hacienda Pública Española / Review of Public Economics, IEF, vol. 215(4), pages 9-26, December.
    16. Dmitry Kulikov, 2012. "Testing for Rational Speculative Bubbles on the Estonian Stock Market," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 4(1).
    17. repec:zbw:bofrdp:2016_003 is not listed on IDEAS
    18. Chung‐Hua Shen & Hsing‐Hua Hsu, 2022. "The determinants of Asian banking crises—Application of the panel threshold logit model," International Review of Finance, International Review of Finance Ltd., vol. 22(1), pages 248-277, March.
    19. Agustín Goenaga & Oriol Sabaté & Jan Teorell, 2023. "The state does not live by warfare alone: War and revenue in the long nineteenth century," The Review of International Organizations, Springer, vol. 18(2), pages 393-418, April.
    20. Ricardo Sabbadini, 2018. "International Reserves Management in a Model of Partial Sovereign Default," Working Papers, Department of Economics 2018_14, University of São Paulo (FEA-USP).
    21. Lovchikova, Marina & Matschke, Johannes, 2024. "Capital controls and the global financial cycle," European Economic Review, Elsevier, vol. 163(C).

    More about this item

    Keywords

    Financial Liberalization; Bank Fragility; Tunisian Banks; SUR Regression.;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F6 - International Economics - - Economic Impacts of Globalization
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:65075. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.