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

Vighneswara Swamy ()

MPRA Paper from University Library of Munich, Germany

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

Keywords: financial stability; instability; banks; financial institutions (search for similar items in EconPapers)
JEL-codes: E44 E58 G1 G21 G28 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-ban and nep-mac
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Published in Journal of International Business and Economy 1.14(2013): pp. 87-117

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