Robustness tests for association between NBFI growth and banking stability (estimation using Driscoll–Kray method)
| Variables | Expected sign | (1) | (2) | (3) | (4) | (5) | (6) | (7) |
|---|---|---|---|---|---|---|---|---|
| Dependent variable | Bank Zscore | |||||||
| YOYOFI/TFA | +/− | −0.001** (0.0004) | −0.00096*** (0.0003) | −0.0012** (0.0004) | −0.00061 (0.00038) | −0.00041 (0.00038) | ||
| YOYEF2 | +/− | −0.0011 (0.0009) | ||||||
| YOYEF2/TEF | +/− | 0.00039 (0.0009) | ||||||
| Bank3Conc | +/− | −0.0003 (0.0008) | −0.00009 (0.00077) | −0.0002 (0.0008) | −0.001 (0.0009) | −0.00038 (0.0009) | ||
| Bank5Conc | +/− | −0.00044 (0.001) | 0.0001 (0.001) | |||||
| BankO_Hcost/TA | − | −0.0093 (0.0093) | 0.00096 (0.0017) | |||||
| BankC_I | − | −0.0061** (0.0026) | −0.0061* (0.0029) | −0.0063** (0.0027) | −0.0048* (0.0024) | −0.00078 (0.0024) | ||
| BankNIM | + | 0.053*** (0.005) | 0.038*** (0.008) | 0.039*** (0.010) | 0.039*** (0.006) | 0.045*** (0.0077) | 0.054*** (0.01) | 0.052*** (0.005) |
| BankCRAR | + | 0.021*** (0.0058) | 0.02** (0.0074) | 0.029*** (0.007) | 0.021*** (0.0074) | 0.021** (0.0073) | 0.018*** (0.0038) | |
| GDP | + | −0.0014 (0.0015) | −0.00027 (0.0013) | −0.0024 (0.0016) | 0.00024 (0.0018) | 0.00025 (0.0013) | 0.00011 (0.0016) | −0.0011 (0.0007) |
| Inflation | − | −0.0002 (0.0007) | 0.00011 (0.00067) | −0.0004 (0.0012) | 0.00022 (0.00083) | 2.5e-06 (0.0005) | −0.0012 (0.0015) | −0.00058 (0.0009) |
| StockTr | + | 0.0005 (0.0004) | ||||||
| Liquidity | + | 0.0023** (0.0008) | ||||||
| OS publicDebt | − | 0.0005 (0.0011) | ||||||
| WGI | + | 0.075** (0.019) | ||||||
| Crisis | − | −0.059** (0.027) | −0.052* (0.025) | −0.043 (0.024) | −0.049* (0.025) | −0.044** (0.02) | ||
| Year | 0.012 (0.002) | 0.012*** (0.002) | ||||||
| Constant | 2*** (0.091) | 2.3*** (0.14) | 2.2*** (0.10) | 2.3*** (0.13) | 2.2*** (0.1) | −21*** (4) | −22*** (4.3) | |
| Number of observations | 164 | 165 | 134 | 162 | 168 | 136 | 125 | |
| Number of countries | 11 | 11 | 10 | 11 | 11 | 11 | 11 | |
| Country effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |
| Time effects | No | No | No | No | No | Yes | Yes | |
| Within R squared | 0.29 | 0.31 | 0.28 | 0.29 | 0.3595 | 0.41 | 0.444 | |
| F | 74.39*** | 26.01*** | 17.55*** | 44*** | 28*** | 24*** | 36*** | |
| Variables | Expected sign | (1) | (2) | (3) | (4) | (5) | (6) | (7) |
|---|---|---|---|---|---|---|---|---|
| Dependent variable | Bank Zscore | |||||||
| YOYOFI/TFA | +/− | −0.001** (0.0004) | −0.00096*** (0.0003) | −0.0012** (0.0004) | −0.00061 (0.00038) | −0.00041 (0.00038) | ||
| YOYEF2 | +/− | −0.0011 (0.0009) | ||||||
| YOYEF2/TEF | +/− | 0.00039 (0.0009) | ||||||
| Bank3Conc | +/− | −0.0003 (0.0008) | −0.00009 (0.00077) | −0.0002 (0.0008) | −0.001 (0.0009) | −0.00038 (0.0009) | ||
| Bank5Conc | +/− | −0.00044 (0.001) | 0.0001 (0.001) | |||||
| BankO_Hcost/TA | − | −0.0093 (0.0093) | 0.00096 (0.0017) | |||||
| BankC_I | − | −0.0061** (0.0026) | −0.0061* (0.0029) | −0.0063** (0.0027) | −0.0048* (0.0024) | −0.00078 (0.0024) | ||
| BankNIM | + | 0.053*** (0.005) | 0.038*** (0.008) | 0.039*** (0.010) | 0.039*** (0.006) | 0.045*** (0.0077) | 0.054*** (0.01) | 0.052*** (0.005) |
| BankCRAR | + | 0.021*** (0.0058) | 0.02** (0.0074) | 0.029*** (0.007) | 0.021*** (0.0074) | 0.021** (0.0073) | 0.018*** (0.0038) | |
| GDP | + | −0.0014 (0.0015) | −0.00027 (0.0013) | −0.0024 (0.0016) | 0.00024 (0.0018) | 0.00025 (0.0013) | 0.00011 (0.0016) | −0.0011 (0.0007) |
| Inflation | − | −0.0002 (0.0007) | 0.00011 (0.00067) | −0.0004 (0.0012) | 0.00022 (0.00083) | 2.5e-06 (0.0005) | −0.0012 (0.0015) | −0.00058 (0.0009) |
| StockTr | + | 0.0005 (0.0004) | ||||||
| Liquidity | + | 0.0023** (0.0008) | ||||||
| OS publicDebt | − | 0.0005 (0.0011) | ||||||
| WGI | + | 0.075** (0.019) | ||||||
| Crisis | − | −0.059** (0.027) | −0.052* (0.025) | −0.043 (0.024) | −0.049* (0.025) | −0.044** (0.02) | ||
| Year | 0.012 (0.002) | 0.012*** (0.002) | ||||||
| Constant | 2*** (0.091) | 2.3*** (0.14) | 2.2*** (0.10) | 2.3*** (0.13) | 2.2*** (0.1) | −21*** (4) | −22*** (4.3) | |
| Number of observations | 164 | 165 | 134 | 162 | 168 | 136 | 125 | |
| Number of countries | 11 | 11 | 10 | 11 | 11 | 11 | 11 | |
| Country effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |
| Time effects | No | No | No | No | No | Yes | Yes | |
| Within | 0.29 | 0.31 | 0.28 | 0.29 | 0.3595 | 0.41 | 0.444 | |
| F | 74.39*** | 26.01*** | 17.55*** | 44*** | 28*** | 24*** | 36*** | |
Note(s): ***, ** and * indicate significance at the 1%, 5% and 10% levels, respectively. The models are estimated using the fixed-effect method, and standard errors are corrected using the Driscoll–Kraay method. It accounts for heteroscedasticity, cross-section dependence and serial correlation
The results for association between shadow banking growth and banking stability is presented using Log of Bank Z score (BankZscore) as the dependent variable. The explanatory variables include the NBFI growth measured as the growth rate of the 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 economic function (YOYEF2/TEF). Bank-specific variables include bank concentration of three largest banks (Bank3Conc), bank concentration of five largest banks (Bank5Conc), bank cost-to-income ratio (BankC_I), bank overhead cost to total assets (Banko_hcost/TA), bank net interest margin (BankNIM) and bank capital adequacy ratio (BankCRAR). Macro-economic variables include GDP, Inflation, StockTr, Liquidity, ratio of outstanding public debt to GDP (OSpublicDebt), World Governance Index (WGI) and crisis dummy
Source(s): Authors' own creation
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