Business cycle, market power and bank behaviour in emerging countries.pdf.pdf

International Economics 139 (2014) 109–132
Contents lists available at ScienceDirect
International Economics
journal homepage: ate/inteco
Business cycle, market power and bank
behaviour in emerging countries
Zied Saadaoui a,b,n
a LARMA, Université Tunis-El Manar, Tunisia
b LÉAD, Université de Toulon, France
article info abstract
Available online 15 April 2014 This paper tries to e the lack of empirical studies on bank
Jel classification: cyclical behaviour in emerging countries. According to the literature,
G21 petition is also a relevant determinant of banking
stability in emerging countries, but does market power influences
Keywords: the relationship between business cycle and bank behaviour?
Capital buffers Drawing from two bodies of literature – business cycle and market
Loan default risk power effects on banking stability – this study is the first to give an
Business cycle answer to this question using a quite representative sample of 740
Market mercial banks installed in 50 emerging countries, observed
Emerging countries from 1997 to 2008. Estimation of a simultaneous equations model
demonstrates, after several robustness checks that bank capital
buffers and loan default risk are negatively correlated with the
business cycle, which supports the implementation of the Basel
countercyclical prudential tools in emerging countries. The study
also shows that market power attenuates the negative relationship
between business cycle and bank behaviour, suggesting that banking
authorities in emerging countries should also consider pe-
titive behaviour of banks in implementing countercyclical capital
standards.
& 2014 CEPII (Centre d’Etudes Prospectives et d’Informations
Internationales), a center for research and expertise on the world
economy Published by Elsevier Ltd. All rights reserved.
n Correspondence address: Faculté des Sciences Économiques et de Gestion de Sfax, Route de l'aéroport Km 4, 3018, Sfax,
Tunisia. Tel.: