Statistical Analysis

IBS Assignment

Faculty: Prepared By,

Saurabh Chandra Pathak Ashis Lamba (005EPGP2014)

ABSTRACT

In this paper, we are trying to compare actual measures of the banking structure obtained from transition economies with that of benchmark measures obtained from developed economies This will provide us with a basis for evaluating the state of development of the banking systems in the transition economies.

The basic method of this paper involves two stages. In the first stage, we carry out cross section regression tests to determine the most important proximate causes of the observed

structure of banking systems in developed economies (We have chosen the OECD data because it represents the most complete and comparable data set for our banking system measures). In the second stage, we apply the regressions estimated in the first stage to 21 transition economies, to obtain benchmarks for the efficient structure of the banking systems in these countries. A comparison of the actual and benchmark measures then provides a basis for evaluating the state of development of the banking systems in the transition economies.

In contrast to the economic growth literature, which takes the banking system structure as given, our focus is on the factors that determine banking system structure. This methodology assumes that the banking systems in the developed economies have reached an efficient equilibrium and that the observed cross-country variations in banking system structure can be related in a dependable way to the distinctive economic, demographic, financial, and geographic features of each of these countries and their economies. Our goal is to provide objective and replicable multidimensional measures of banking system development for the transition economies, which can then be applied to questions of economic growth in these countries.

INTRODUCTION

Earlier Literature have shown the banking system development to have been measured with simple and...