Robustness tests using growth of lending to NBFIs as the dependent variable
| Variables | (1) | (2) | (3) | (4) |
|---|---|---|---|---|
| Dependent variable | BankZscore | FVI | ||
| YOY NBFI Lending | −0.0009* (0.00048) | −0.001** (0.00045) | −0.00012 (0.000092) | −0.000087 (0.000092) |
| Bank3Conc | −0.0015* (0.0009) | −0.0009 (0.0007) | 0.00044 (0.0012) | −0.00015 (0.0014) |
| BankC_I | −0.0043*** (0.0017) | −0.0033** (0.0016) | 0.003 (0.0029) | 0.0013 (0.0029) |
| GDP | 0.0009 (0.002) | 0.0014 (0.0018) | −0.0049 (0.0039) | −0.0018 (0.0043) |
| Inflation | −0.0017 (0.0012) | 0.00002 (0.0012) | −0.0037 (0.0035) | −0.0023 (0.0039) |
| BankCRAR | 0.019*** (0.0046) | −0.021 (0.011) | ||
| BankNIM | 0.037*** (0.0065) | 0.035*** (0.0066) | −0.025 (0.013) | −0.027 (0.013) |
| Constant | 1.9*** (0.13) | 1.6*** (0.13) | 0.086 (0.28) | −0.12 (0.25) |
| Number of observations | 181 | 169 | 152 | 163 |
| Number of countries | 11 | 11 | 11 | 11 |
| Country effects | Yes | Yes | Yes | Yes |
| Time effects | Yes | Yes | Yes | Yes |
| R squared | 0.94 | 0.96 | 0.56 | 0.52 |
| Wald Chi-Square | 1102087*** | 3279894*** | 127652*** | 174027*** |
| Variables | (1) | (2) | (3) | (4) |
|---|---|---|---|---|
| Dependent variable | BankZscore | FVI | ||
| YOY NBFI Lending | −0.0009* (0.00048) | −0.001** (0.00045) | −0.00012 (0.000092) | −0.000087 (0.000092) |
| Bank3Conc | −0.0015* (0.0009) | −0.0009 (0.0007) | 0.00044 (0.0012) | −0.00015 (0.0014) |
| BankC_I | −0.0043*** (0.0017) | −0.0033** (0.0016) | 0.003 (0.0029) | 0.0013 (0.0029) |
| GDP | 0.0009 (0.002) | 0.0014 (0.0018) | −0.0049 (0.0039) | −0.0018 (0.0043) |
| Inflation | −0.0017 (0.0012) | 0.00002 (0.0012) | −0.0037 (0.0035) | −0.0023 (0.0039) |
| BankCRAR | 0.019*** (0.0046) | −0.021 (0.011) | ||
| BankNIM | 0.037*** (0.0065) | 0.035*** (0.0066) | −0.025 (0.013) | −0.027 (0.013) |
| Constant | 1.9*** (0.13) | 1.6*** (0.13) | 0.086 (0.28) | −0.12 (0.25) |
| Number of observations | 181 | 169 | 152 | 163 |
| Number of countries | 11 | 11 | 11 | 11 |
| Country effects | Yes | Yes | Yes | Yes |
| Time effects | Yes | Yes | Yes | Yes |
| 0.94 | 0.96 | 0.56 | 0.52 | |
| Wald Chi-Square | 1102087*** | 3279894*** | 127652*** | 174027*** |
Note(s): ***, ** and * indicate significance at the 1%, 5% and 10% levels, respectively. The models are estimated using PCSE estimation
The results for association between shadow banking growth and financial stability are presented. The dependent variable, financial stability, is measured using log of Bank Z score (banking stability) in models 1-4 and Financial Vulnerability Index (FVI -overall stability) in models 5-8. The explanatory variables include the shadow banking growth measured as year-on-year lending to NBFIs as a ratio to GDP. 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 and Inflation
Source(s): Authors' own creation
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