Robustness tests for association between NBFI growth and overall stability (estimation using the Driscoll–Kray method)
| Variables | Expected sign | (1) | (2) | (3) | (4) | (5) | (6) | (7) |
|---|---|---|---|---|---|---|---|---|
| Dependent variable | FVI | |||||||
| YOYOFI/TFA | +/− | 0.0067*** (0.0016) | 0.0053** (0.0017) | 0.0031 (0.0019) | 0.0066*** (0.0017) | 0.0067*** (0.0017) | ||
| YOYEF2 | +/− | 0.0025* (0.0012) | ||||||
| YOYEF2/TEF | +/− | 0.0031** (0.0014) | ||||||
| Policyrate | −0.0071 (0.008) | −0.015 (0.009) | ||||||
| Bank3Conc | +/− | 0.0018 (0.0011) | 0.00081 (0.00083) | 0.00083 (0.0008) | 0.0005 (0.0012) | |||
| BankC_I | + | −0.0041 (0.0042 | −0.0011 (0.0046) | −0.00071 (0.0041) | 0.0051 (0.0048) | |||
| BankCRAR | − | −0.0002 (0.018) | −0.00095 (0.017) | −0.0005 (0.019) | ||||
| BankNIM | − | −0.043** (0.015) | −0.018 (0.017) | −0.017 (0.018) | 0.031 (0.018) | |||
| GDP | − | −0.0037 (0.0031) | −0.0025 (0.0024) | −0.0009 (0.005) | −0.0021 (0.0026) | −0.0021 (0.0027) | 0.0022 (0.0023) | 0.0037 (0.0026) |
| Inflation | + | 0.0007 (0.0029) | −0.0003 (0.0024) | 0.00002 (0.0038) | 0.00083 (0.003) | 0.00082 (0.003) | −0.0015 (0.0028) | −0.0039 (0.0038) |
| WGI | − | 0.024 (0.053) | ||||||
| Crisis | + | −0.087 (0.075) | −0.20 (0.079) | |||||
| Year | 0.035*** (0.0056) | 0.038*** (0.0053) | 0.034*** (0.006) | 0.033*** (0.0051) | 0.039 (0.0052) | 0.037*** (0.0059) | ||
| Constant | −70*** (11) | −76*** (11) | 0.28 (0.21) | −68*** (11) | −67*** (10) | −0.8** (0.31) | −75*** (12) | |
| Number of observations | 168 | 165 | 130 | 152 | 152 | 124 | 124 | |
| Number of countries | 11 | 11 | 10 | 11 | 11 | 11 | 11 | |
| Country effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |
| Time effects | Yes | Yes | No | Yes | Yes | No | Yes | |
| Within R squared | 0.28 | 0.32 | 0.1285 | 0.26 | 0.26 | 0.31 | 0.30 | |
| F | 18.43*** | 20.23*** | 13.26*** | 23*** | 45*** | 60.62*** | 33.24*** | |
| Variables | Expected sign | (1) | (2) | (3) | (4) | (5) | (6) | (7) |
|---|---|---|---|---|---|---|---|---|
| Dependent variable | FVI | |||||||
| YOYOFI/TFA | +/− | 0.0067*** (0.0016) | 0.0053** (0.0017) | 0.0031 (0.0019) | 0.0066*** (0.0017) | 0.0067*** (0.0017) | ||
| YOYEF2 | +/− | 0.0025* (0.0012) | ||||||
| YOYEF2/TEF | +/− | 0.0031** (0.0014) | ||||||
| Policyrate | −0.0071 (0.008) | −0.015 (0.009) | ||||||
| Bank3Conc | +/− | 0.0018 (0.0011) | 0.00081 (0.00083) | 0.00083 (0.0008) | 0.0005 (0.0012) | |||
| BankC_I | + | −0.0041 (0.0042 | −0.0011 (0.0046) | −0.00071 (0.0041) | 0.0051 (0.0048) | |||
| BankCRAR | − | −0.0002 (0.018) | −0.00095 (0.017) | −0.0005 (0.019) | ||||
| BankNIM | − | −0.043** (0.015) | −0.018 (0.017) | −0.017 (0.018) | 0.031 (0.018) | |||
| GDP | − | −0.0037 (0.0031) | −0.0025 (0.0024) | −0.0009 (0.005) | −0.0021 (0.0026) | −0.0021 (0.0027) | 0.0022 (0.0023) | 0.0037 (0.0026) |
| Inflation | + | 0.0007 (0.0029) | −0.0003 (0.0024) | 0.00002 (0.0038) | 0.00083 (0.003) | 0.00082 (0.003) | −0.0015 (0.0028) | −0.0039 (0.0038) |
| WGI | − | 0.024 (0.053) | ||||||
| Crisis | + | −0.087 (0.075) | −0.20 (0.079) | |||||
| Year | 0.035*** (0.0056) | 0.038*** (0.0053) | 0.034*** (0.006) | 0.033*** (0.0051) | 0.039 (0.0052) | 0.037*** (0.0059) | ||
| Constant | −70*** (11) | −76*** (11) | 0.28 (0.21) | −68*** (11) | −67*** (10) | −0.8** (0.31) | −75*** (12) | |
| Number of observations | 168 | 165 | 130 | 152 | 152 | 124 | 124 | |
| Number of countries | 11 | 11 | 10 | 11 | 11 | 11 | 11 | |
| Country effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |
| Time effects | Yes | Yes | No | Yes | Yes | No | Yes | |
| Within | 0.28 | 0.32 | 0.1285 | 0.26 | 0.26 | 0.31 | 0.30 | |
| F | 18.43*** | 20.23*** | 13.26*** | 23*** | 45*** | 60.62*** | 33.24*** | |
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
The results for association between shadow banking growth and overall stability are presented using the Financial Vulnerability Index (FVI) as the dependent variable. 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), bank net interest margin (BankNIM) and bank capital adequacy ratio (BankCRAR). Macro-economic variables include GDP, Inflation, central bank policy rate, World Governance Index (WGI) and crisis dummy.
Source(s): Authors' own creation
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