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The Efficiency of the Banking Network in Relation to Changes in the Asset Market

Author

Listed:
  • Neda Assadollahzadehjafari
  • Bahar Hafezi
  • Seyed Mohsen Khalifehsoltani

Abstract

Purpose: The purpose of writing this study is to evaluate the efficiency of the country`s banking network about the number of changes in the asset market, including the stock market and the foreign exchange market. Design/Methodology/Approach: This paper uses the Markov rotation model for the period 2008:3-2018:3 quarterly. The Hodrick Prescott filter was used to extract exchange rate fluctuations, stock market indicators, and commercial cycles. Findings: The results indicated that commercial cycles have a negative and significant effect on all banking network efficiency regimes. Exchange rate fluctuations had a negative and significant effect on the high regime of banking network efficiency and a positive and significant effect on the low regime of banking network efficiency. Fluctuations in the stock index had no significant effect on the high regime of efficiency, but they had a positive and significant effect on the banking network efficiency in its low regime. The results showed that the probability of a banking network being in a low-efficiency regime is increasing in the coming years. Practical Implications: These findings provide a better understanding of how business cycles affect banking network performance regimes. Originality/Value: The results of this study remind the Exchange and Stock Markets Organization in the country that their management should be carried out based on the level and efficiency regime of the banking network.

Suggested Citation

  • Neda Assadollahzadehjafari & Bahar Hafezi & Seyed Mohsen Khalifehsoltani, 2021. "The Efficiency of the Banking Network in Relation to Changes in the Asset Market," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 99-117.
    • Handle: RePEc:ers:ijebaa:v:ix:y:2021:i:3:p:99-117
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    References listed on IDEAS

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    4. Shamshur, Anastasiya & Weill, Laurent, 2019. "Does bank efficiency influence the cost of credit?," Journal of Banking & Finance, Elsevier, vol. 105(C), pages 62-73.
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    More about this item

    Keywords

    Banking network efficiency; Islamic contracts; Markov rotation model.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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