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On the Sensitivity of Banking Activity to Macroeconomic Shocks: Evidence from CEMAC Sub-region

Sensibilité du Secteur Bancaire aux Chocs Macroéconomiques: Cas de la sous-région CEMAC

Christian Nguena () and Roger Tsafack-Nanfosso ()
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Roger Tsafack-Nanfosso: REMA - REMA - REMA (Research in Applied Micro and Macro Economy) - REMA - Recherche

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Abstract: This paper qualitatively and quantitatively assesses the degree of resilience in the financial intermediary sector of the Economic and Monetary Community of Central African States (CEMAC) to macroeconomic shocks and discusses the relevant policy implications. Using GMM and a battery of estimations techniques, the panel-based investigations broadly show that the sub-region is vulnerable to macroeconomic shocks. Lower bank provisions result on the one hand from shortages or decreases in long-term financing, real exchange, GDP per capita growth rate and on the other hand from increases of interest rates. Whereas the change in interest rate increases net income commission, the effect is negative from lower levels of short-term financing. The incidence of changes in interest rates on the interest rate margin of banks is ambiguous. The findings broadly confirm the need to incorporate macroeconomic shocks in financial policy decision making. The paper contributes at the same to the knowledge on stock management in monetary zones and the need to: (1) timely intervene to mitigate potential shocks and; (2) increase control to sustain the credibility of the banking system.

Keywords: Macroeconomic shock; Panel data econometrics; Shocks management; Banking economics. (search for similar items in EconPapers)
Date: 2014-02-28
New Economics Papers: this item is included in nep-cba, nep-ger, nep-mac and nep-mon
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01097850
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Published in Economics Bulletin, Economics Bulletin, 2014, 34, pp.354 - 372

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