Did financial liberalization lead to bank fragility? Evidence from Tunisia

Hamdi, Helmi and Hakimi, Abdelaziz and Djelassi, Mouldi (2013): Did financial liberalization lead to bank fragility? Evidence from Tunisia. Published in: The International Journal of Business and Finance Research , Vol. Vol 7, No. 5 (2013): pp. 77-88.

Abstract

The debate on the effects of financial liberalization on banking sector is far from being conclusive. In fact, financial liberalization is recommended by some scholars on the one hand and it is not supported by some others in the other hand. In this confused situation, it is so interesting to study the consequences of the introduction of financial liberalization program on the Tunisian banking sector in order to evaluate the country’s experience. To reach this goal, we collected date related to 9 banks observed for the period of 1980-2009. By using a Seemingly Unrelated Regression (SUR), our estimation shows that financial liberalization affected negatively the profitability of Tunisian banks and increased the degree of credit risk. Empirical results show, however, that financial liberalization increased significantly the liquidity of banks, tanks to liberalization of deposit interest rates and the accumulation of capital inflows from international companies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial Liberalization, Bank Fragility, Tunisian Banks, SUR Regression.
• Subjects: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance; F - International Economics > F6 - Economic Impacts of Globalization; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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