BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 6/2012:
Financial sector in resource-dependent economies
Sanna Kurronen ()
Abstract: This paper examines financial sector characteristics in
resource-dependent economies. Using a unique dataset covering 133
countries, we present empirical evidence that the banking sector tends to
be smaller in resource-dependent economies, even when controlling for
several other factors which have been shown to have a significant effect on
financial sector development in previous studies. Moreover, the threshold
level at which the increasing resource-dependence begins to be harmful for
domestic banking sector is very low. We also find evidence that the use of
market-based and foreign financing is more common in resource-dependent
economies. Further, we argue that a relatively small financial sector used
to cater the needs of the resource sector might be unfavorable for emerging
businesses, thereby hampering economic diversification and reinforcing the
resource curse.
Keywords: resource dependence; resource curse; financial sector; banks; panel data; (follow links to similar papers)
JEL-Codes: G20; O16; O57; Q32; (follow links to similar papers)
36 pages, March 22, 2012
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