IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2022-04-15.html
   My bibliography  Save this article

Testing the Non-Linear Relationship between Liquidity Risk and Bank Stability in the MENA Region

Author

Listed:
  • Mohamed Ali Khemiri

    (VPNC Lab, Faculty of Law, Economics and Management of Jendouba, University of Jendouba, Tunisia.)

Abstract

This paper aims to investigate whether the relationship between liquidity risk and bank stability is non-linear. It uses a sample of 83 MENA banks from 2005 to 2020. Due to several economic, financial, and regulation differences, the whole sample was divided into two sub-samples. The first one is related to Middle East countries and covers 56 banks while the second one is related to North African countries and covers 27 banks. We performed the Panel Smooth Threshold Regression (PSTR) model proposed by Gonz lez et al. (2005) as an empirical approach. The empirical results indicate that exists a threshold effect in the liquidity risk-bank stability relationship. More specifically, we found that below a certain threshold, the loan to-deposit-ratio does not exert any significant effect on bank stability in the Middle East; while it significantly increases the stability of banks in North African countries. Above, the same threshold, the loan-to-deposit ratio significantly decreases bank stability for the two sub-samples.

Suggested Citation

  • Mohamed Ali Khemiri, 2022. "Testing the Non-Linear Relationship between Liquidity Risk and Bank Stability in the MENA Region," International Journal of Economics and Financial Issues, Econjournals, vol. 13(4), pages 125-133, July.
    • Handle: RePEc:eco:journ1:2022-04-15
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/14536/7431
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/14536
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Martin Wittenberg & Murray Leibbrandt, 2017. "Measuring Inequality by Asset Indices: A General Approach with Application to South Africa," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 706-730, December.
    2. Fiona Tregenna, 2012. "What are the distributional implications of halving poverty in South Africa when growth alone is not enough?," Applied Economics, Taylor & Francis Journals, vol. 44(20), pages 2577-2596, July.
    3. Tsehay, Abrham Seyoum & Bauer, Siegfried, 2012. "Poverty and Vulnerability Dynamics: Empirical Evidence from Smallholders in Northern Highlands of Ethiopia," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 51(4), pages 1-32, November.
    4. Fisher, Monica G. & Weber, Bruce A., 2004. "Does Economic Vulnerability Depend On Place Of Residence? Asset Poverty Across The Rural-Urban Continuum," Working Papers 18911, Oregon State University, Rural Poverty Research Center (RPRC).
    5. Naschold, Felix, 2012. "“The Poor Stay Poor”: Household Asset Poverty Traps in Rural Semi-Arid India," World Development, Elsevier, vol. 40(10), pages 2033-2043.
    6. repec:rre:publsh:v:34:y:2004:i:2:p:137-55 is not listed on IDEAS
    7. Tsehay, Abrham Seyoum & Bauer, Siegfried, 2012. "Poverty Dynamics and Vulnerability: Empirical Evidence from Smallholders in Northern Highlands of Ethiopia," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 126780, Agricultural and Applied Economics Association.
    8. Tsehay, Abrham Seyoum & Bauer, Siegfried, 2012. "Poverty Dynamics and Vulnerability: Empirical Evidence from Smallholders in Northern Highlands of Ethiopia," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126873, International Association of Agricultural Economists.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sunil Khosla & Pradyot Ranjan Jena, 2022. "Analyzing vulnerability to poverty and assessing the role of universal public works and food security programs to reduce it: Evidence from an eastern Indian state," Review of Development Economics, Wiley Blackwell, vol. 26(4), pages 2296-2316, November.
    2. Jena, Pradyot Ranjan & Khosla, Sunil & Rahut, Dil Bahadur, 2024. "Can farmers with higher capabilities fend off falling into future Poverty? Empirical evidence from a tribal region in eastern India," World Development Perspectives, Elsevier, vol. 33(C).
    3. Sunil Khosla & Pradyot Ranjan Jena, 2023. "Using Multidimensional Poverty Measure to Target Right Beneficiaries to Achieve Sustainable Development Goal-1 in India," Indian Journal of Human Development, , vol. 17(2), pages 290-309, August.
    4. Adepoju, A., 2018. "determinants of multidimensional poverty transitions among rural households in Nigeria," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276027, International Association of Agricultural Economists.
    5. H. Sebukeera & I. Mukisa & E. Bbaale, 2023. "Climate change and household vulnerability to poverty in Uganda," Journal of Economic Policy and Management Issues, JEPMI, vol. 2(1), pages 14-27.
    6. Javier Parada Gómez Urquiza & Alejandro López-Feldman, 2013. "Poverty dynamics in rural Mexico: What does the future hold?," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 55-74, November.
    7. Abdul Latif Alhassan & Noluyolo Magazi, 2021. "Microinsurance and household asset welfare in South Africa," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 358-382, July.
    8. Walelign,Solomon Zena & Wang Sonne,Soazic Elise & Seshan,Ganesh Kumar, 2022. "Livelihood Impacts of Refugees on Host Communities : Evidence from Ethiopia," Policy Research Working Paper Series 10044, The World Bank.
    9. Dutta, Indranil & Nogales, Ricardo & Yalonetzky, Gaston, 2021. "Endogenous weights and multidimensional poverty: A cautionary tale," Journal of Development Economics, Elsevier, vol. 151(C).
    10. Rishi Kumar, 2022. "Household poverty dynamics in tribal Madhya Pradesh, India: A case study of 54 villages," Poverty & Public Policy, John Wiley & Sons, vol. 14(2), pages 184-203, June.
    11. Purna Fitria, 2017. "Assets and poverty status dynamics in 5 main regions in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 9(1), pages 104-113, April.
    12. Chhavi Tiwari & Srinivas Goli & Mohammad Zahid Siddiqui & Pradeep S. Salve, 2022. "Poverty, wealth inequality and financial inclusion among castes in Hindu and Muslim communities in Uttar Pradesh, India," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(6), pages 1227-1255, August.
    13. Adaiah Lilenstein, 2020. "Better measures of progress: Developing reliable estimates of educational access and quality in Francophone sub-Saharan Africa," Working Papers 13/2020, Stellenbosch University, Department of Economics.
    14. Bridgman, Grace & von Fintel, Dieter, 2022. "Stunting, double orphanhood and unequal access to public services in democratic South Africa," Economics & Human Biology, Elsevier, vol. 44(C).
    15. Attila N Lázár & Helen Adams & W Neil Adger & Robert J Nicholls, 2020. "Modelling household well-being and poverty trajectories: An application to coastal Bangladesh," PLOS ONE, Public Library of Science, vol. 15(9), pages 1-23, September.
    16. Fredrick M. Wamalwa & Justine Burns, 2017. "Gender and Birth Order Effects on Intra-household Schooling Choices and Education Attainments in Kenya," SALDRU Working Papers 203, Southern Africa Labour and Development Research Unit, University of Cape Town.
    17. Mathieu J. P. Poirier & Karen A. Grépin & Michel Grignon, 2020. "Approaches and Alternatives to the Wealth Index to Measure Socioeconomic Status Using Survey Data: A Critical Interpretive Synthesis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(1), pages 1-46, February.
    18. Katharina Lehmann-Uschner & Kati Krähnert, 2018. "When Shocks Become Persistent: Household-Level Asset Growth in the Aftermath of an Extreme Weather Event," Discussion Papers of DIW Berlin 1759, DIW Berlin, German Institute for Economic Research.
    19. Solomon Zena Walelign & Mariève Pouliot & Helle Overgaard Larsen & Carsten Smith-Hall, 2015. "A novel approach to dynamic livelihood clustering: Empirical evidence from Nepal," IFRO Working Paper 2015/09, University of Copenhagen, Department of Food and Resource Economics.
    20. Haider, Hamza, "undated". "Asset Management & Coping Strategies in Burkina Faso," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259956, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Liquidity Risk; Bank Stability; MENA Region; Non-Linear Relationship;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2022-04-15. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.