Systemic banking crisis, regulatory framework and economic growth resilience: Insight from the African economies

Abstract

Considering the increasing efforts to deal with the negative shocks exacerbated by past and recent crisis events, we examine the impact of regulatory policies on the link between systemic banking crisis and economic growth. We apply the dynamic system Generalized Method of Moments (GMM) estimation for a panel dataset of 54 African countries over the period, 2004–2020. We found that a systemic banking crisis leads to a decline in economic growth in a non-interaction specification with regulatory policy framework. We show that stringent policy actions by the central bank and government are important in bolstering economic growth resilience. We provide evidence to support the position that, regulatory policies through conditional marginal effects reduce the negative impact of a systemic banking crisis on economic growth. Therefore, regulators and policymakers should continue to deploy strategies that curb systemic banking crises and bolster economic growth through the lens of complementarity regulatory framework.