The effect of political and economic uncertainty on the stability of the banking sector
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

The effect of political and economic uncertainty on the stability of the banking sector

Document Type : Original Article

Authors
davoud hasani 1
Mir Feyz Fallahshams 2
Gholamreza Zomorodian 3
1 Department of Management, Tehran Center Branch, Islamic Azad University, Tehran, Iran.
2 Associate Professor, Department of Financial Management, Tehran Center Branch, Islamic Azad University, Tehran, Iran.
3 Department of Financial Management, Tehran Center Branch, Islamic Azad University, Tehran, Iran
10.22034/jse.2023.12143.2089
Abstract
The main purpose of this study is to investigate the impact of economic and policy uncertainty on the financial stability of the banking sector. In this regard, firstly, using Generalized AutoRegressive Conditional Heteroskedasticity (GARCH), inflation uncertainty as an indicator of economic uncertainty, government tax revenue uncertainty and exchange rate uncertainty as indicators of government policy uncertainty are calculated. Then, the impact of these indicators on the financial stability of the banking sector (calculated using the ZSCORE approach) has been examined. In this study, the monthly data of 19 banks including Melli, Sepah, Post Bank, Maskan, Tejarat, Mellat, Karafarin, Eghtesad Novin, Parsian, Pasargad, Mellal, Sina, Ayandeh, Day, Tourism, Shahr, Iran Zamin, Qarz Al-Hasaneh Resalat and the Middle East has been used in the period 2015 to 2020. The results of this study show a negative and significant relationship between inflation uncertainty and exchange rate uncertainty with the financial stability of the banking sector. However, the coefficient of tax revenues uncertainty is not statistically significant. In addition, the results of the final model indicate a positive relationship between the bank deposit ratio and a negative relationship between the size and ratio of foreign debt with the financial stability of the banking sector.
Keywords
Economic Uncertainty
Policy Uncertainty
Financial Stability
Banking Sector
Zscore Approach
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Quarterly Journal of Securities Exchange
Volume 16, Issue 63
Winter 2024
Pages 299-320