What is the net effect of financial liberalization on bank productivity? A decomposition analysis of bank total factor productivity growth
What is the net effect of financial liberalization on bank productivity? A decomposition analysis of bank total factor productivity growth
We employ a unique framework to quantify the net effect of financial liberalization on banks’ total factor productivity (TFP) growth through a decomposition analysis of two effects: a positive direct effect of financial liberalization on bank TFP growth; and a negative indirect effect operating through a higher propensity to systemic banking crisis. The empirical decomposition is based on a sample of 1,530 banks operating in 88 countries over the period 1999-2011. We find that the net effect of financial liberalization on bank TFP growth is positive: the direct positive effect outweighs the negative one. An important policy implication flows from these findings.
Financial liberalization, Banking crisis, Systemic risk, Bank productivity, Total factor productivity
67-78
Tanna, Sailesh
4dd83d1e-e298-44e1-a99e-11b21672c285
Luo, Yun
2ac0f228-573d-43e7-b309-1529b6f3d174
De Vita, Glauco
002fc6bf-e5ed-4a13-8993-0ce5e1fc2005
June 2017
Tanna, Sailesh
4dd83d1e-e298-44e1-a99e-11b21672c285
Luo, Yun
2ac0f228-573d-43e7-b309-1529b6f3d174
De Vita, Glauco
002fc6bf-e5ed-4a13-8993-0ce5e1fc2005
Tanna, Sailesh, Luo, Yun and De Vita, Glauco
(2017)
What is the net effect of financial liberalization on bank productivity? A decomposition analysis of bank total factor productivity growth.
Journal of Financial Stability, 30, .
(doi:10.1016/j.jfs.2017.04.003).
Abstract
We employ a unique framework to quantify the net effect of financial liberalization on banks’ total factor productivity (TFP) growth through a decomposition analysis of two effects: a positive direct effect of financial liberalization on bank TFP growth; and a negative indirect effect operating through a higher propensity to systemic banking crisis. The empirical decomposition is based on a sample of 1,530 banks operating in 88 countries over the period 1999-2011. We find that the net effect of financial liberalization on bank TFP growth is positive: the direct positive effect outweighs the negative one. An important policy implication flows from these findings.
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Net effect
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Accepted/In Press date: 11 April 2017
e-pub ahead of print date: 15 April 2017
Published date: June 2017
Keywords:
Financial liberalization, Banking crisis, Systemic risk, Bank productivity, Total factor productivity
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Local EPrints ID: 438344
URI: http://eprints.soton.ac.uk/id/eprint/438344
ISSN: 1572-3089
PURE UUID: c1f37dba-1591-4266-81c6-43fbd1c81a06
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Date deposited: 06 Mar 2020 17:30
Last modified: 17 Mar 2024 04:00
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Author:
Sailesh Tanna
Author:
Glauco De Vita
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