Does Primary Sovereignty Risk Matter for Bank Fragility? Evidence from Albanian Banking System

Shijaku, Gerti (2016): Does Primary Sovereignty Risk Matter for Bank Fragility? Evidence from Albanian Banking System.

Abstract

The paper studies the pass-through effect of primary sovereignty risk on bank stability. For this reason, we followed a new approach using on-site bank balance sheet information to construct our proxy that represent each bank stability condition and use a variety of internal and external factors to estimate a balance panel dynamic two-step General Method of Moments (GMM) approach for the period 2008 Q3 – 2015 Q03. We found no supportive evidence that pass-through effect of primary sovereignty risk does affected bank stability. Rather improving macroeconomic and financial market condition are found to be important components through which banks are more immune. The rest of results imply that other bank-specific indicators, namely the extent of intermediation, off-balance sheet active, excessive capital, credit risk and profitability do not have a significant affect.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bank Fragility, Primary Sovereignty Risk, Panel Data, Dynamic GMM
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C26 - Instrumental Variables (IV) Estimation; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt

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