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Impact of national financial regulation on macroeconomic and fiscal performance after the 2007 financial shock: Econometric analyses based on cross-country data

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  • Hagen, Tobias

Abstract

Using cross-country data, this paper estimates the impact of the 2007 financial shock on countries' macroeconomic developments conditional on national financial regulations before the crisis. For this purpose, the financial reform index developed by Abiad et al. (A New Database of Financial Reforms, 2008) is used. The econometric analyses indicate that countries with more deregulated financial markets experienced deeper recessions, stronger employment losses, and larger government budget deficits. Against the background of the ongoing global crisis and the results of other studies, the usefulness of liberalized financial markets for macroeconomic stability and economic development should be rigorously reconsidered.

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  • Hagen, Tobias, 2013. "Impact of national financial regulation on macroeconomic and fiscal performance after the 2007 financial shock: Econometric analyses based on cross-country data," Economics Discussion Papers 2013-26, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201326
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    4. López-Laborda, Julio & Peña, Guillermo, 2017. "Does financial VAT affect the size of the financial sector?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-28.

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    More about this item

    Keywords

    financial crisis; financial regulation; Great Recession; robust regression; semiparametric regression;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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