erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Measuring the Quality of Bank Regulation and Supervision and Its Macroeconomic Effects

Nergiz Dinçer (Bilkent University)
Bilin Neyaptı (Bilkent University)

Abstract

This study provides a general framework to measure the quality of bank regulation and supervision (RS) by developing a comprehensive set of criteria designed to evaluate banking laws. It also presents measures of RS for transition economies, enabling a comparison of the quality of the legal regulatory frameworks adopted by those countries since the end of 1980s. Using this data, the current paper also conducts an empirical analysis of the connection between RS and the macroeconomic variables of interest, namely, inflation budget deficits and growth. The main results of the estimation of random-effects model are that RS is significantly negative in explaining oth inflation and deficits, and significantly positive in explaining the real growth rate of GDP. We also note that past episodes of financial crises, in turn, have significant positive effect on the level of quality of RS.

Economic Research Center
Middle East Technical University
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e-mail: metuerc@metu.edu.tr