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On the Banking Deepening and Economic Volatility Nexus in Emerging Countries: Evidence from a GMM Panel-VAR Approach

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  • Meriem Sebai

    (University of Tunis El-Manar, TUNISIA)

  • Omar Talbi

    (University of Tunis El-Manar, TUNISIA)

  • Hella Guerchi Mehri

    (University of Tunis El-Manar, TUNISIA)

Abstract

This study investigates the dynamic causal relationship between banking deepening and economic growth volatility in 38 emerging countries from 1985 to 2020.To accomplish this, a panel autoregressive vector within a generalized method of moments framework is employed.Furthermore, impulse response functions are utilized to scrutinize the reaction of banking deepening aftershocks on economic volatility and vice versa. Finally, the analysis extends to include forecast error variance decompositions of the variables. The results underscore compelling evidence indicating that positive shocks in banking deepening significantly contribute to heightened economic volatility. Conversely, nations characterized by elevated economic volatility tend to exhibit restrained progress in banking deepening. These findings emphasize the urgent need for policymakers to implement stronger financial regulatory measures, bolstering risk management protocols and oversight mechanisms.

Suggested Citation

  • Meriem Sebai & Omar Talbi & Hella Guerchi Mehri, 2024. "On the Banking Deepening and Economic Volatility Nexus in Emerging Countries: Evidence from a GMM Panel-VAR Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(5), pages 430-442, May.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:5:p:430-442
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