Banking soundness-financial stability nexus: empirical evidence from Jordan
Open Access
- 9 October 2020
- journal article
- Published by LLC CPC Business Perspectives in Banks and Bank Systems
- Vol. 15 (3), 218-227
- https://doi.org/10.21511/bbs.15(3).2020.19
Abstract
The main purpose of this study is to investigate the relationship between financial stability and banking soundness in Jordan. For this purpose, the study mainly uses the FMOLS approach in addition to other analysis techniques and tools. The outcomes of the descriptive analysis show that the Jordanian financial system seems stable, and the indicators of banking soundness signal a steady and solid banking sector. The cointegration tests indicate that the considered variables have a long-term equilibrium relationship; the variables move together in the long term. The empirical results reveal that the majority of the banking soundness indicators have a positive impact on financial stability. This asserts that a sound banking sector plays a vital role in maintaining a stable financial system. However, the findings also indicate that a steady interest rate policy is one of the significant requirements for sustaining the stability of financial systems. Moreover, the response of financial stability with respect to economic growth changes is found to be positive and relatively high. On the fact of the importance of the topic under study, since financial stability is one of the major concerns of the authority bodies, the empirical findings can have very important policy implications for decision-makers.Keywords
This publication has 26 references indexed in Scilit:
- Spillover Effects of US Monetary Policy on Banking Development: Evidence from the Asian RegionGlobal Business Review, 2019
- Dynamic impact of interest rate volatility and spillover effect of the U.S. interest rate on banking sector development of Turkey: empirical evidence from cointegration and causality analysisAsia-Pacific Journal of Accounting & Economics, 2017
- Electricity demand for Sri Lanka: A time series analysisEnergy, 2008
- Defining and achieving financial stabilityJournal of Financial Stability, 2006
- The Theory of Bank Risk Taking and Competition RevisitedThe Journal of Finance, 2005
- Competition and stability: what's special about banking?Published by Edward Elgar Publishing ,2003
- Size, Charter Value and Risk in Banking: An International PerspectiveSSRN Electronic Journal, 2001
- Can Relationship Banking Survive Competition?The Journal of Finance, 2000
- Size and performance of banking firms: Testing the predictions of theoryJournal of Monetary Economics, 1993
- Likelihood Ratio Statistics for Autoregressive Time Series with a Unit RootEconometrica, 1981