Measuring the Quality of Bank Regulation and Supervision, with an Application to Transition Economies

This study develops a method to evaluate the quality of a legal framework for bank regulation and supervision (RS) by developing an extensive set of criteria and a coding system. Using this method, we generate an original set of measurements for RS by evaluating the letter of banking laws of 23 transition economies. In doing so, we also utilize the Basle guidelines on banking supervision and the related literature. The indices of RS indicate that legal banking reforms in Poland, Hungary and Estonia have been more ambitious than the rest of the countries in transition. In general, however, banking laws in transition economies indicate a lower regulatory and supervisory quality than indicated by the German banking law, if one is willing to choose the latter as a benchmark. This data set permits an empirical analysis of the relationship between legal RS and macroeconomic performance. The empirical evidence in the paper shows a significant positive relationship between RS and real GDP growth in transition economies.Bank regulation and supervision, growth, transition economies

Central Bank Transparency: Where, Why, and with What Effects?

Greater transparency in central bank operations is the most dramatic change in the conduct of monetary policy in recent years. In this paper we present new information on its extent and effects. We show that the trend is general: a large number of central banks have moved in the direction of greater transparency since the late 1990s. We then analyze the determinants and effects of central bank transparency in an integrated empirical framework. Transparency is greater in countries with more stable and developed political systems and deeper and more developed financial markets. Our preliminary analysis suggests broadly favorable if relatively weak impacts on inflation and output variability.

Macroeconomic Impact of Bank Regulation and Supervision: A cross-country investigation

Cataloged from PDF version of article.Bank regulation and supervision (RS) is a formal institutional mechanism that aims to reduce the adverse selection and moral hazard risks in the banking sector. This paper offers an empirical exploration of the relationship between banking-sector performance and RS using data on the legal quality of bank regulation and supervision. The main channels via which RS affects bank performance are considered to be depositor trust, investment mobilization, and borrower discipline. An event study of up to fifty-three countries provides robust evidence that RS has significant positive effects on bank deposits and investment rate and significant negative effects on nonperforming loans

Who Should Supervise? The Structure of Bank Supervision and the Performance of the Financial System

We assemble data on the structure of bank supervision, distinguishing supervision by the central bank from supervision by a nonbank governmental agency and independent from dependent governmental supervisors. Using observations for 140 countries from 1998 through 2010, we find that supervisory responsibility tends to be assigned to the central bank in low-income countries where that institution is one of few public-sector agencies with the requisite administrative capacity. It is more likely to be undertaken by a non-independent agency of the government in countries ranked high in terms of government efficiency and regulatory quality. We show that the choice of institutional arrangement makes a difference for outcomes. Countries with independent supervisors other than the central bank have fewer nonperforming loans as a share of GDP even after controlling for inflation, per capita income, and country and/or year fixed effects. Their banks are required to hold less capital against assets, presumably because they have less need to protect against loan losses. Savers in such countries enjoy higher deposit rates. There is some evidence, albeit more tentative, that countries with these arrangements are less prone to systemic banking crises.

Central Bank Transparency: Causes, Consequences and Updates

We present updated estimates of central bank for 100 countries up through 2006 and use them to analyze both the determinants and consequences of monetary policy transparency in an integrated econometric framework. We establish that there has been significant movement in the direction of greater central bank transparency in recent years. Transparent monetary policy arrangements are more likely in countries with strong and stable political institutions. They are more likely in democracies, with their culture of transparency. Using these political determinants as instruments for transparency, we show that more transparency monetary policy operating procedures is associated with less inflation variability though not also with less inflation persistence.

External Income Shocks and turkish Exports: A Sectoral Analysis

Cataloged from PDF version of article.This study assesses how the growth rates of Turkish trading partners affected Turkish exports in various sectors for the period 1996:01 to 2009:12. To determine this, we modeled the destination countries and the export demand for each sector separately. Each model is estimated as a system of equations, where each equation represents a country using a seemingly unrelated regression method. The empirical evidence suggests that Motor Vehicles, Basic Metals, and Radio-Television are the sectors with the highest income elasticities for most of the analyzed countries, whereas the Food Products and Beverages sector has the lowest income elasticity. We also performed simulations for the effect of a 1% increase in the growth rate of each country on Turkish exports. © 2013 Elsevier B.V

Effects of Growth Volatility on Economic Performance

Cataloged from PDF version of article.This paper examines the relationship between growth and growth volatility for a small open economy with high growth volatility: Turkey. Quarterly data for the period from 1987Q1 to 2007Q3 suggests that growth volatility reduces growth and that this result is robust under different specifications. This paper contributes to the literature by focusing on how growth volatility affects a set of variables that are crucial for growth. Empirical evidence from Turkey suggests that higher growth volatility reduces total factor productivity, investment, and the foreign currency value of local currency (depreciation). Moreover, it increases employment, though the evidence for this is not statistically significant. © 2011 Elsevier B.V. All rights reserved

Inflation and inflation uncertainty in the G-7 countries

This study examines the relationship between inflation and inflation uncertainty in the G-7 countries for the period from 1957 to 2001. The causality between the inflation and inflation uncertainty is tested by using the Full Information Maximum Likelihood Method with extended lags. Our results suggest that inflation causes inflation uncertainty for all the G-7 countries, while inflation uncertainty causes inflation for Canada, France, Japan, the UK and the US. Furthermore, we find that in four countries (Canada, France, the UK and the US) increased uncertainty lowers inflation, and in only one country (Japan), increased uncertainty raises inflation. © 2004 Elsevier B.V. All rights reserved

An Anatomy of Productivity in Turkey in the AKP Era through a Political Economy Lens

The main aim of the current paper is to investigate the productivity dynamics of Turkish economy between 2003-2015, during the Adalet ve Kalkınma Partisi (AKP) era, to contribute to the ongoing discussions of long-term economic growth of the country, using a unique data set and firm-level granular productivity analysis. Furthermore, the political economy of the deindustrialization of Turkey is scrutinized as a complement to the productivity analysis. Among a plethora of results, the following three are the most important ones in terms of their policy implications: (i) The aggregate productivity figures underestimate the productivity improvements in the manufacturing sector and overestimate the productivity losses in the services sector. (ii) The productivity growth of manufacturing sector in Turkey has been positive yet evolving towards medium-low tech manufacturing which displays the lowest productivity growth among all manufacturing sectors. (iii) While the surviving firms in the Turkish manufacturing sector have increased their own productivity in the AKP era, in the services sector surviving firms had a negative contribution to aggregate productivity growth