Good governance and financial crises: a global evidence
by Davoud Mahmoudinia; Behrouz Sadeghi Amroabadi
Global Business and Economics Review (GBER), Vol. 29, No. 2, 2023

Abstract: The purpose of this study is to provide empirical evidence on the links between financial crises and good governance indicators. We employ the data for a sample of 89 developing and 29 developed countries from 1996-2018 to investigate the links. In line with the literature, our dependent variables are banking, debt, currency, and twin and triple crises. Using a panel logit model, we find that good governance, low corruption, increased transparency, a modern legislation system, and high political stability could reduce the likelihood of financial crises in all three samples (developing countries, developed countries, and all countries). The study also shows a positive relationship between various types of financial crises and a large number of macroeconomic variables, including inflation, exchange rate, debt, real interest rate, and credit. Moreover, according to our results, GDP and foreign direct investment could reduce the likelihood of any financial crisis. Hence, this study contributes to the literature by considering good governance indicators as influential factors leading to different types of financial crises.

Online publication date: Mon, 07-Aug-2023

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