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Banking System Resilience and Financial Stability - An Evidence from Indian Banking

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  • Swamy, Vighneswara

Abstract

This paper while emphasising the importance of the concept of financial stability in wake of recent global financial crisis in particular and other (banking and financial) crises in general attempts to highlight the significance of the soundness of banking sector in emerging economies where banking sector constitutes a lion’s share in the financial system. This study examines banking sector stability by constructing a micro vector auto regressive (VAR) model and establishes the significance of the interrelatedness of the bank-specific variables such as; Liquidity, Asset Quality, Capital Adequacy and Profitability. Further, the paper offers a substantive review of literature on the concept of financial stability in backdrop of the ongoing definition debate for financial stability. A significant contribution of this study is that, by employing the most appropriate key determinants of banking sector soundness, the paper constructs a recursive micro VAR model to explain the interdependence and comovement of the banking stability covariates in a bank-dominated financial system that aids in understanding the dynamics of financial stability of emerging economies

Suggested Citation

  • Swamy, Vighneswara, 2013. "Banking System Resilience and Financial Stability - An Evidence from Indian Banking," MPRA Paper 49597, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:49597
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    File URL: https://mpra.ub.uni-muenchen.de/49597/1/5-Vighneswara%20Swamy.pdf
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    References listed on IDEAS

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    2. Allen, William A. & Wood, Geoffrey, 2006. "Defining and achieving financial stability," Journal of Financial Stability, Elsevier, vol. 2(2), pages 152-172, June.
    3. Dimitrios P. Tsomocos, 2012. "Equilibrium Analysis, Banking and Financial Instability," Chapters, in: The Challenge of Financial Stability, chapter 4, pages 61-97, Edward Elgar Publishing.
    4. Mr. Fabian Valencia & Mr. Luc Laeven, 2008. "Systemic Banking Crises: A New Database," IMF Working Papers 2008/224, International Monetary Fund.
    5. Charles Goodhart & Pojanart Sunirand & Dimitrios Tsomocos, 2006. "A Time Series Analysis of Financial Fragility in the UK Banking System," Annals of Finance, Springer, vol. 2(1), pages 1-21, January.
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    7. Goodhart, Charles A. E. & Sunirand, Pojanart & Tsomocos, Dimitrios P., 2004. "A model to analyse financial fragility: applications," Journal of Financial Stability, Elsevier, vol. 1(1), pages 1-30, September.
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    9. Mr. Garry J. Schinasi, 2004. "Defining Financial Stability," IMF Working Papers 2004/187, International Monetary Fund.
    10. Céline Gauthier & Christopher Graham & Ying Liu, 2004. "Financial Conditions Indexes for Canada," Staff Working Papers 04-22, Bank of Canada.
    11. World Bank, 2011. "World Development Indicators 2011," World Bank Publications - Books, The World Bank Group, number 2315, December.
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    Citations

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    Cited by:

    1. Rachita Gulati & Nirmal Singh, 2019. "Analysing bank stability in India: Evidence from 2007/08-2016/17," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(6), pages 1-7.
    2. Swamy, Vighneswara, 2014. "Bank regulation, supervision and efficiency during the global financial crisis," MPRA Paper 58295, University Library of Munich, Germany.
    3. Vighneshwara Swamy, 2015. "Bank Regulation, Supervision, and Performance around the World: What has been the Change since the Global Financial Crisis," IEG Working Papers 348, Institute of Economic Growth.

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    More about this item

    Keywords

    financial stability; instability; banks; financial institutions;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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