Contents of the volume

2018, Volume 71 - Issue 3

ISSN: 2499-8265
RSS feed citation: At RePEc
Publication date: 03 August 2018

THE FUTURE OF EUROPE: ECONOMIC AND SOCIAL PROSPECTS

Amedeo Amato

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IL FUTURO DELL'EUROPA: PROSPETTIVE ECONOMICHE E SOCIALI - WELCOME ADDRESS

Paolo Odone

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EUROPE'S FUTURE: ECONOMIC AND SOCIAL PROSPECTS

Angelo Bagnasco

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EUROPE'S FUTURE AT THE CROSSROADS: THE CHALLENGE OF IMMIGRATION

Stefano Stefanini

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WHY A EUROZONE COLLAPSE SHOULD NOT BE A SURPRISE: THE ROLE OF GERMANY AND GREECE

George Zestos, Morgan H. Simmons

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FINANCIAL CRISIS, BANKING SECTOR PERFORMANCE AND ECONOMIC GROWTH IN THE EUROPEAN UNION

Cândida Ferreira

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FIXING THE EUROZONE SETUP: ON VIABLE FORMS OF FISCAL UNION

Luca Gandullia, Franco Praussello

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AMONG THE CENTRAL AND EASTERN EUROPEAN COUNTRIES OF THE EUROPEAN UNION, WHO GAINED AND WHO LOST?

Miroslav N. Jovanovic, Jelena Damnjanovic, Jovan Njegic

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THE EXCHANGE RATE REGIME SWITCH AND CURRENT ACCOUNT IN GREECE, 1976-2014

Alexi Thompson, Henry Thompson

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Genoa Chamber of Commerce
Economia Internazionale / International Economics

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Corresponding author

Cândida FERREIRA, Lisbon School of Economics and Management, Universidade de Lisboa and UECE – Research Unit in Complexity and Economics, Lisboa, Portugal

Financial Crisis, Banking Sector Performance and Economic Growth in the European Union

Pages

257-288

Abstract

This paper uses static and dynamic panel estimates in a sample including all 28 European Union countries during the last decade and provides empirical evidence on the important role that well-functioning EU banking institutions can play in promoting economic growth. The banking sector performance is proxied by the evolution of some relevant financial ratios and economic growth is represented by the annual Gross Domestic Product growth rate. In order to analyse the possible differences arising after the outbreak of the recent international financial crisis, the estimations consider two panels: one for the time period 1998-2012 and another for the subinterval 2007-2012. The results obtained allow us to confirm the importance of the variation of the different operational, capital, liquidity and assets quality financial ratios to economic growth. More precisely, we concluded that in the universe of the EU member states, for the interval including the years before and after the financial crisis (1998-2012), the variations of the Return on Average Assets, the Equity to Total Assets Ratio, the Debt to Equity Ratio, the Equity to Liabilities Ratio and the Net Loans to Total Deposits Ratio grew in line with the GDP growth rate;  while the evolution of the Net Interest Margin, the Cost to Income Ratio and the Impaired Loans to Gross Loans Ratio was opposite to the GDP growth. However, considering only the years after the crisis (2007-2012), the variation of the Net Interest Margin was in line with the GDP while the variations of the Equity to Total Assets Ratio and the Equity to Liabilities Ratio contrast the GDP growth rate. These differences between the two considered time panels reflect the reactions of the European banking institutions to the recent financial crisis, as they, in general, adopted a less risky performance and decided to give particular emphasis to the traditional banking activities: receiving deposits and providing credit to finance the productive investment, in order to promote economic growth.

JEL classification

F30, F40, G20, G30, O40

Keywords

Bank Performance, Economic Growth, European Union, Financial Crisis, Panel Estimates

Index

  1. Introduction
  2. Review of some relevant literature
  3. Data and Estimation Methodology
  4. Empirical results
  5. Summary and conclusions 

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