Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/317385 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Business Economics and Management (JBEM) [ISSN:] 2029-4433 [Volume:] 21 [Issue:] 1 [Year:] 2020 [Pages:] 200-221
Publisher: 
Vilnius Gediminas Technical University, Vilnius
Abstract: 
This paper investigates the effect of bank competition and financial stability on economic growth by examining panel-data from 38 European countries over 2001 to 2017. Bank competition is measured with the Boone indicator, and bank stability with Z-scores and non-performing loan ratios, all at the country level. This study employs a fixed-effect estimator, as well as a system generalized method of moment (GMM) estimator to control unobserved heterogeneity, endogeneity, the dynamic effect of economic growth, and reverse causality in its estimation. Results show that bank stability significantly contributes to economic growth in Europe. Economic growth falls during crisis periods (both the global financial crisis and the local banking crisis), highlighting the importance of a resilient banking system during crisis periods. Moreover, empirical outcomes show that lower banking competition supports economic growth and increases financial stability. This study provides a framework for banks and regulators to boost economic growth through the channel of banking stability.
Subjects: 
bank stability
bank competition
economic growth
system GMM
global financial crisis
local banking crisis
bank Z-score
non-performing loans
channelling effect
JEL: 
G21
G28
O52
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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