Association between NBFI growth and overall stability
| Variables | Expected sign | (1) | (2) | (3) | (4) | (5) | (6) | (7) |
|---|---|---|---|---|---|---|---|---|
| Dependent variable | FVI | |||||||
| YOYOFI/TFA | +/− | 0.0031** (0.0013) | 0.003** (0.0014) | 0.0026** (0.0012) | 0.0026** (0.0012) | 0.0039** (0.0019) | ||
| YOYEF2 | +/− | 0.0028** (0.0001) | ||||||
| YOYEF2/TEF | +/− | 0.0024* (0.0014) | ||||||
| Policyrate | 0.0018 (0.0042) | 0.00029 (0.0044) | ||||||
| Bank3Conc | +/− | 0.00017 (0.0012 | 0.00029 (0.0013) | 0.00068 (0.0017) | 0.0019 (0.002) | |||
| BankC_I | + | 0.0022 (0.0029) | 0.002 (0.0029) | −0.0033 (0.016) | 0.0042 (0.0043) | |||
| BankCRAR | − | −0.019* (0.01) | −0.018* (0.01) | 0.002 (0.015) | ||||
| BankNIM | − | −0.029** (0.013 | −0.029** (0.013) | −0.033** (0.016) | ||||
| GDP | − | 0.000018 (0.0043) | 0.00024 (0.0043) | −0.0045 (0.0038) | −0.0042 (0.0039) | −0.00041 (0.0051) | 0.0012 (0.0037) | −0.0018 (0.007) |
| Inflation | + | −0.00048 (0.0047 | −0.00095 (0.0038) | −0.0032 (0.0033) | −0.0029 (0.0034) | −0.0043 (0.0037) | −0.0042 (0.0048) | |
| WGI | − | 0.045 (0.04) | ||||||
| Crisis | − | −0.023 (0.10) | ||||||
| Constant | −0.31*** (0.11) | −0.38*** (0.11) | −0.21 (0.23) | −0.2 (0.23) | 0.11 (0.37) | −0.5*** (0.12) | −0.57*** | |
| Number of observations | 168 | 165 | 152 | 152 | 152 | 138 | 112 | |
| Number of countries | 11 | 11 | 11 | 11 | 11 | 11 | 11 | |
| Country effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |
| Time effects | Yes | Yes | Yes | Yes | No | Yes | Yes | |
| R squared | 0.54 | 0.56 | 0.57 | 0.58 | 0.39 | 0.61 | 0.55 | |
| Wald Chi-Square | 346935*** | 411032*** | 140253*** | 152298*** | 279*** | 236572*** | 3.9e+07*** | |
| Variables | Expected sign | (1) | (2) | (3) | (4) | (5) | (6) | (7) |
|---|---|---|---|---|---|---|---|---|
| Dependent variable | FVI | |||||||
| YOYOFI/TFA | +/− | 0.0031** (0.0013) | 0.003** (0.0014) | 0.0026** (0.0012) | 0.0026** (0.0012) | 0.0039** (0.0019) | ||
| YOYEF2 | +/− | 0.0028** (0.0001) | ||||||
| YOYEF2/TEF | +/− | 0.0024* (0.0014) | ||||||
| Policyrate | 0.0018 (0.0042) | 0.00029 (0.0044) | ||||||
| Bank3Conc | +/− | 0.00017 (0.0012 | 0.00029 (0.0013) | 0.00068 (0.0017) | 0.0019 (0.002) | |||
| BankC_I | + | 0.0022 (0.0029) | 0.002 (0.0029) | −0.0033 (0.016) | 0.0042 (0.0043) | |||
| BankCRAR | − | −0.019* (0.01) | −0.018* (0.01) | 0.002 (0.015) | ||||
| BankNIM | − | −0.029** (0.013 | −0.029** (0.013) | −0.033** (0.016) | ||||
| GDP | − | 0.000018 (0.0043) | 0.00024 (0.0043) | −0.0045 (0.0038) | −0.0042 (0.0039) | −0.00041 (0.0051) | 0.0012 (0.0037) | −0.0018 (0.007) |
| Inflation | + | −0.00048 (0.0047 | −0.00095 (0.0038) | −0.0032 (0.0033) | −0.0029 (0.0034) | −0.0043 (0.0037) | −0.0042 (0.0048) | |
| WGI | − | 0.045 (0.04) | ||||||
| Crisis | − | −0.023 (0.10) | ||||||
| Constant | −0.31*** (0.11) | −0.38*** (0.11) | −0.21 (0.23) | −0.2 (0.23) | 0.11 (0.37) | −0.5*** (0.12) | −0.57*** | |
| Number of observations | 168 | 165 | 152 | 152 | 152 | 138 | 112 | |
| Number of countries | 11 | 11 | 11 | 11 | 11 | 11 | 11 | |
| Country effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |
| Time effects | Yes | Yes | Yes | Yes | No | Yes | Yes | |
| 0.54 | 0.56 | 0.57 | 0.58 | 0.39 | 0.61 | 0.55 | ||
| Wald Chi-Square | 346935*** | 411032*** | 140253*** | 152298*** | 279*** | 236572*** | 3.9e+07*** | |
Note(s): ***, ** and * indicate significance at the 1%, 5% and 10% levels, respectively. The models are estimated using PCSE estimation
The results for association betwwen NBFI growth and overall stability using the financial vulnerability index (FVI) as a dependent variable is presented. The explanatory variables include the shadow banking growth measured as the growth rate of ratio of OFI financial assets to total financial assets (YOYOFI/TFA), yoy growth of financial assets of EF2 (YOYEF2) and growth rate of the ratio of financial assets of EF2 to financial assets of total EF (YOYEF2/TEF). Bank-specific variables include bank concentration of three largest banks (Bank3Conc), bank cost-to-income ratio (BankC_I), BankNIM and bank capital adequacy ratio (BankCRAR). Macro-economic variables include GDP, Inflation, central bank policy rate, World Governance Indexr (WGI) and crisis dummy
Source(s): Authors' own creation
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