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Dynamic Impact of Banking Performance on Financial Stability: Fresh Evidence from Southeastern Europe

Author

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  • Veton Zeqiraj

    (Faculty of Economics, University of Prishtina, Kosovo; Central Bank of the Republic of Kosovo; Fulbright Visiting Scholar University of Arkansas)

  • Flamur Mrasori

    (Faculty of Law, University of Prishtina, Kosovo; Central Bank of the Republic of Kosovo)

  • Omer Iskenderoglu

    (Halisdemir University, Faculty of Economics and Administrative Sciences, Nigde, Turkey)

  • Kazi Sohag

    (Graduate School of Economics and Management Ural Federal University, Russia; Center of Research Excellence in Renewable Energy and Power Systems, King Abdulaziz University, Jeddah, Saudi Arabia)

Abstract

This study addresses the issue of whether banking performance impacts financial stability in Southeastern European countries. To answer this question, the GMM approach has been applied in the analyses of the panel data over the period 2000-2015 for Southeastern Europe. The findings reveal the presence of significant positive long-run relationship between ROA, ROE, trade openness, and human capital, while government expenditures have negative impact on financial stability. Trade openness, human capital and government expenditures can keep the financial system stable as a whole. The Granger causality analysis discloses the main hypothesis where the banking system in this part of Europe accounts for more than 80% of the financial system. The study sheds light to the policymakers and research about the role of banking performance on financial stability for this region of Europe.

Suggested Citation

  • Veton Zeqiraj & Flamur Mrasori & Omer Iskenderoglu & Kazi Sohag, 2021. "Dynamic Impact of Banking Performance on Financial Stability: Fresh Evidence from Southeastern Europe," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(1), pages 165-181.
    • Handle: RePEc:cbk:journl:v:10:y:2021:i:1:p:165-181
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    References listed on IDEAS

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    4. Zeqiraj, Veton & Sohag, Kazi & Hammoudeh, Shawkat, 2022. "Financial inclusion in developing countries: Do quality institutions matter?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    Financial stability; Banking performance; Generalized Method of Moments; Southeastern Europe.;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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