Does Going Tough on Banks Make the Going Get Tough? Bank Liquidity Regulations, Capital Requirements, and Sectoral Activity

Whether and to what extent tougher bank regulation weighs on economic growth is an open empirical question. Using data from 28 manufacturing industries in 50 countries, we explore the extent to which cross-country differences in bank liquidity and capital levels were related to differences in sector...

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Bibliographic Details
Main Author: Igan, Deniz
Other Authors: Mirzaei, Ali
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2020
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Does Going Tough on Banks Make the Going Get Tough? Bank Liquidity Regulations, Capital Requirements, and Sectoral Activity  |c Deniz Igan, Ali Mirzaei 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2020 
300 |a 64 pages 
651 4 |a United States 
653 |a Economic & financial crises & disasters 
653 |a Depository Institutions 
653 |a Asset requirements 
653 |a Capital adequacy requirements 
653 |a Banks 
653 |a Finance 
653 |a Financial crises 
653 |a Banks and banking 
653 |a General Financial Markets: Government Policy and Regulation 
653 |a Micro Finance Institutions 
653 |a Financial Institutions and Services: Government Policy and Regulation 
653 |a Basel III 
653 |a Asset and liability management 
653 |a Mortgages 
653 |a Liquidity 
653 |a Liquidity; Economics 
653 |a Banks and banking; State supervision 
653 |a Banks and Banking 
653 |a Financial regulation and supervision 
653 |a Banking 
653 |a Financial Risk Management 
653 |a Financial services law & regulation 
653 |a Portfolio Choice 
653 |a Finance: General 
653 |a Investment Decisions 
653 |a Liquidity requirements 
653 |a Financial Crises 
700 1 |a Mirzaei, Ali 
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520 |a Whether and to what extent tougher bank regulation weighs on economic growth is an open empirical question. Using data from 28 manufacturing industries in 50 countries, we explore the extent to which cross-country differences in bank liquidity and capital levels were related to differences in sectoral activity around the period of the global financial crisis. We find that industries which are more dependent on external finance, in countries where banks had higher liquidity and capital ratios, performed relatively better during the crisis, with regard to investment rates and the creation of new enterprises. This relationship, however, exists only for bank-based systems and emerging market economies. In the pre-crisis period, we find only a marginal link to bank capital. These findings survive a battery of robustness checks and provide some solid support for the tighter prudential measures introduced under Basel III.