Essays on Financial Liberalisation and Banking Supervision Policies in Developed and Developing Economies
thesisposted on 04.03.2013, 12:56 by Syed Faizan Iftikhar
This thesis discusses the liberalisation and banking regulation and supervision policies in the large data set of countries. Chapter 1 provides the detailed overview of the three distinct essays. Chapter 2 examines the impact of capital account liberalisation and financial development on economic growth by utilizing the data of 71 developed and developing countries. The empirical evidence of this chapter indicates that capital account liberalisation and financial sector development play an important role in future economic growth. More specifically, in middle and lower income countries, capital account liberalisation and financial development also have a positive and significant relationship with economic growth; the effects of capital account liberalisation in these countries are much higher than in high income countries. Chapter 3 investigates the impact of financial liberalisation and banking regulation and supervision policies on net interest margins by using the Bank-scope database of more than 1300 individual banks in 76 countries. A dynamic two-step system GMM estimation technique provides the evidence, which indicates that financial reform, financial liberalisation and banking regulation and supervision lead to lower net interest margins. Specifically, interest rate controls and barriers to entry have become more important factors in reducing interest margins. Chapter 4 also uses the Bank-scope database of the banking sector of 76 developed and developing countries to explore the relationship between financial reform, financial liberalisation and the quality of banking regulation and supervision on financial fragility, by applying a dynamic two-step system GMM panel estimator. The finding of this chapter is that the financial vulnerability of the banking sector could be affected not only by bank-specific and macro-specific variables, but also by financial liberalisation and banking regulation and supervision policies. The results show that financial reform and financial liberalisation significantly enhance the likelihood of financial fragility, while strong banking regulation and supervision reduce it.