The banking sector : what affected the number of banks leading to the 2008 financial crisis?

Abstract

The issue of banks and the banking sector has been raging topic in these times. Because of that, I was motivated to write about this topic as I wanted to examine the issue of bank failures. I used a multiple regression econometric model in order to regress the number of banks on the variables that concern us which are consumer loans, bank credit, real estate loans, recession, regulation, delinquency rate, stock market, and the prime rate. We took three models, the first being from the year 1984 to 2010. The second model was from 1984 to 1999 and the third model was from 1999 to 2010. The last two models were taken to split the time period into an era of regulation (second model) and an era of deregulation (third period). Several tests on our data were done in order to see whether important assumptions hold or not. Then the three models we estimated to get the results. I found out that not one aspect alone in an economy has major implications on bank numbers and was the sole reason for the financial crisis of the late 2000’s, but the interaction of multiple variables within an economy may have major effects.