Did financial liberalization lead to bank fragility? Evidence from Tunisia

Helmi Hamdi, Abdelaziz Hakimi and Mouldi Djelassi

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Financial Liberalization; Bank Fragility; Tunisian Banks; SUR Regression. (search for similar items in EconPapers)
JEL-codes: F4 F6 G21 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

Published in The International Journal of Business and Finance Research 5.Vol 7(2013): pp. 77-88

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Journal Article: Did Financial Liberalization Lead to Bank Fragility? Evidence from Tunisia (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:65075

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