Measuring the financial stability sentiments and evaluating their impacts on financial soundness, financial stability, and the macroeconomy of Pakistan

Ateeb Akhter Shah Syed (), Kevin Haeseung Lee (), Mohsin Waheed () and Sarah Saleh ()
Additional contact information
Ateeb Akhter Shah Syed: Institute of Business Administration
Kevin Haeseung Lee: Department of Statistics, Western Michigan University
Mohsin Waheed: I.I. Chundrigar Road
Sarah Saleh: I.I. Chundrigar Road

Asia-Pacific Journal of Regional Science, 2025, vol. 9, issue 1, No 2, 27-56

Abstract: Abstract This paper measures the Financial Stability Sentiments Index (FSSI) for the economy of Pakistan, an interesting country case due to its resilient banking sector. We used a Natural Language Processing technique to quantify these sentiments from annual financial stability review reports published by the State Bank of Pakistan, central bank of Pakistan. The index captured events of high and low financial stress in Pakistan, such as the Global Financial Crisis and recent tightening by the Federal Reserve. Regarding the information content of our index, it serves as a leading indicator for selected indicators of financial soundness in Pakistan. Further, asymmetric analysis of the impact of financial stability sentiments on financial stability showed that improvements in the FSSI lead to a higher distance-to-default for two sets of diverse banking institutions in Pakistan, indicating improved financial stability as bank assets far outweigh their obligations. Finally, the index shows an intuitive and significant impact on selected financial soundness indicators as well as the real macroeconomic variables in Pakistan.

Keywords: Financial stability sentiments; FSRs; Natural language processing; VAR; Lead–lag (search for similar items in EconPapers)
JEL-codes: D53 D84 G28 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s41685-024-00362-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:apjors:v:9:y:2025:i:1:d:10.1007_s41685-024-00362-6

Ordering information: This journal article can be ordered from
https://www.springer ... cience/journal/41685

DOI: 10.1007/s41685-024-00362-6

Access Statistics for this article

Asia-Pacific Journal of Regional Science is currently edited by Yoshiro Higano

More articles in Asia-Pacific Journal of Regional Science from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().