Banking stability determinants: evidence from Portugal

Maria Teresa Garcia () and Simão Rodrigues Abreu
Additional contact information
Simão Rodrigues Abreu: ISEG, Lisbon School of Economics and Management, University of Lisbon

Journal of Banking Regulation, 2024, vol. 25, issue 2, No 5, 160-178

Abstract: Abstract This paper aims to assess banking stability and its determinants in Portugal during the period of 2010—2019. The empirical study starts with the construction of an index, which reflects the aggregated banking stability index (ABSI), using financial soundness indicators (FSI) over the period of 2010–2019, on a quarterly basis. The ABSI is then used as the dependent variable to assess the determinants of the Portuguese banking stability. The independent variables were classified into macroeconomic and financial variables, respectively, and the ARMA conditional least square method was considered. The findings suggest an improvement in stability since 2017, and point to significant macroeconomic early warning indicators, such as the growth rate of the consumer price index (%ΔCPI), as well as financial ones, such as the ratio of the second money multiplier (M2) to gross domestic product (GDP). This paper contributes to the banking stability literature by examining the Portuguese case for the first time. The results put in evidence that both macroeconomic and financial indicators can be useful predictors of banking instability.

Keywords: Banking system stability; Time series regression; Stability index; Financial soundness indicators; Macroprudential indicators; Portugal (search for similar items in EconPapers)
JEL-codes: C32 C43 E44 G21 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41261-023-00222-x Abstract (text/html)
Access to full text is restricted to subscribers.

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:pal:jbkreg:v:25:y:2024:i:2:d:10.1057_s41261-023-00222-x

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41261/PS2

DOI: 10.1057/s41261-023-00222-x

Access Statistics for this article

Journal of Banking Regulation is currently edited by Dalvinder Singh

More articles in Journal of Banking Regulation from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().