Does Effectiveness of Macroprudential Policies on Banking Crisis Depend on Institutional Structure?

The question of why some countries suffer from crises, while some others can escape from them, is challenging. Empirical evidence suggests that countries with stronger financial institutions are more durable to the wind of crises. In this paper, we investigate empirically whether the link between the supervision of the banking system and crisis probabilities depends on the institutional structure. We find that effectiveness of the prudent supervision of the financial sector in lowering the probability of banking crises is more pronounced in countries with stronger institutions.