Is public expenditure productive

Legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. Levine, Loayza, and Beck evaluate: Whether the level of development of financial intermediaries exerts a casual influence on economic growth. Whether cross-country differences in legal and accounting systems (such as creditor rights, contract enforcement, and accounting standards) explain differences in the level of financial development. Using both traditional cross-section, instrumental-variable procedures and recent dynamic panel techniques, they find that development of financial intermediaries exerts a large causal impact on growth. The data also show that cross-country differences in legal and accounting systems help determine differences in financial development. Together, these findings suggest that legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the links between the financial system and economic growth. Thorsten Beck may be contacted at tbeck@worldbank.org.

Financial Intermediation and Growth: Causality and Causes

http://faculty.haas.berkeley.edu/ross_levine/Papers/2000_JME_Fin%20Int%20Growth%20Causality.pdf

Financial intermediation and growth: Causality and causes ☆

The ultimate ownership of Western European corporations

In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.

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The Economic Consequences of Legal Origins

Purpose – The purpose of this paper is to discuss and provide new data and measures of bank regulatory and supervisory policies in 180 countries from 1999 to 2011.Design/methodology/approach – The authors' approach is based upon the quantification of hundreds of questions, including information on permissible bank activities, capital requirements, the powers of official supervisory agencies, information disclosure requirements, external governance mechanisms, deposit insurance, barriers to entry, and loan provisioning, to form indices of key bank regulatory and supervisory policies.Findings – It is found that the regulation and supervision of banks varies widely across countries in many different dimensions. Furthermore, there has not been a convergence in bank regulatory regimes over the past decade despite the worst global financial crisis since the Great Depression.Research limitations/implications – The data are based on survey responses and this requires that the answers be accurate. To better ensure...

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Bank regulation and supervision in 180 countries from 1999 to 2011

The recent global financial crisis has spurred renewed interest in identifying those reforms in bank regulation that would work best to promote bank development, performance and stability. Building upon three recent world-wide surveys on bank regulation (Barth et al., 2004, 2006, and 2008), we attempt to contribute to this assessment by examining whether bank regulation, supervision and monitoring enhance or impede bank operating efficiency. Based on an unbalanced panel analysis of more than 4,050 banks observations in 72 countries over the time period 1999-2007, we find that tighter restrictions on bank activities are negatively associated with bank efficiency while greater capital regulation stringency is marginally and positively associated with bank efficiency. In addition, we find that a strengthening of official supervisory power is positively associated with bank efficiency only in countries with independent supervisory authorities. Moreover, independence coupled with a more experienced supervisory authority tends to enhance bank efficiency. Finally, market-based monitoring of banks in terms of more financial transparency is positively associated with bank efficiency.

/pdf/do-bank-regulation-supervision-and-monitoring-enhance-or-c2zochmu6d.pdf

Do Bank Regulation, Supervision and Monitoring Enhance or Impede Bank Efficiency?

The recent global financial crisis has spurred renewed interest in identifying those reforms in bank regulation that would work best to promote bank development, performance and stability. Building upon three recent world-wide surveys on bank regulation ( Barth et al., 2004 , Barth et al., 2006 , Barth et al., 2008 ), we contribute to this assessment by examining whether bank regulation, supervision and monitoring enhance or impede bank operating efficiency. Based on an un-balanced panel analysis of 4050 banks observations in 72 countries over the period 1999–2007, we find that tighter restrictions on bank activities are negatively associated with bank efficiency, while greater capital regulation stringency is marginally and positively associated with bank efficiency. We also find that a strengthening of official supervisory power is positively associated with bank efficiency only in countries with independent supervisory authorities. Moreover, independence coupled with a more experienced supervisory authority tends to enhance bank efficiency. Finally, market-based monitoring of banks in terms of more financial transparency is positively associated with bank efficiency.

/pdf/do-bank-regulation-supervision-and-monitoring-enhance-or-k3wghb1mmc.pdf

Do bank regulation, supervision and monitoring enhance or impede bank efficiency?

Bank supervision and regulation: what works best?

This volume assembles and presents a database on bank regulation in over 150 countries (included also on CD). It offered the first comprehensive cross-country assessment of the impact of bank regulation on the operation of banks, and assesses the validity of the Basel Committee's influential approach to bank regulation. The treatment also provides an empirical evaluation of the historic debate about the proper role of government in the economy by studying bank regulation and analyzes the role of politics in determining regulatory approaches to banking. The data also indicate that restrictions on the entry of banks, government ownership of banks, and restrictions on bank activities hurt banking system performance. The authors find that domestic political factors shape both regulations and their effectiveness.

James R. Barth

Papers

Bank regulation and supervision in 180 countries from 1999 to 2011

Do Bank Regulation, Supervision and Monitoring Enhance or Impede Bank Efficiency?

Do bank regulation, supervision and monitoring enhance or impede bank efficiency?

Bank supervision and regulation: what works best?

Rethinking Bank Regulation