Democracy and Banking Stability: Is the Relationship U-Shaped?

This study addresses the impact of democracy on the stability of the banking system for a sample of 114 countries over the period 2000–2017. Our findings offer strong evidence for a U-shaped relationship between democracy and banking stability. Results also show that the way democratic institutions impact banking stability is highly dependent on their ability to implement effective anti-corruption policies. Controlling for countries’ income levels reveals that not all high-income countries are necessarily enjoying the positive effects of democracy on banking stability.

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Published in: Journal of the Knowledge Economy
License: https://creativecommons.org/licenses/by/4.0
See article on publisher's website: http://dx.doi.org/10.1007/s13132-022-01063-1