IDEAS home Printed from https://ideas.repec.org/a/ibn/ijefaa/v11y2019i12p15.html
   My bibliography  Save this article

Exchange Rate fluctuations and Financial Performance of Banks: Evidence from Sudan

Author

Listed:
  • Nawal Hussein Abbas Elhussein
  • Osama Eltayeb Elfaki Osman

Abstract

This paper aims at investigating whether fluctuations in the exchange rate affect the financial performance of Sudanese banks and detecting the direction of the causal relationship relation between exchange rate and banks¡¯ performance. The study targets a total population of 37 working banks in Sudan and covers the period 2002-2017. The sample comprises of the total set of the population. The paper depends mainly on secondary data, which is collected from consolidated financial reports of commercial banks and other official publications and documents. To test the hypotheses and accuracy and validity of models and data, a set of methods of data analysis are employed, namely, Ordinary Least Squared (OLS), Generalized Least Squares (GLS), Autoregressive Distributed Lag (ARDL) and a number of Diagnostic Tests. The study documents that foreign exchange rate fluctuations, contrary to empirical research findings, have a weak negative effect on Sudanese banks¡¯ financial performance. This may be attributed to the tight economic embargo against Sudan during the period of this study, which isolates the country from the international financial system and adversely affects its ability to engage in cross border activities. Consequently, the banking sector in Sudan is insulated from the effect of international currency movements and its exposure to currency risk that may create unpredictable profits and losses is minimal. In addition, the continuous deterioration of the Sudanese Pound and the limited FDI flows to the country render the investment environment uncompetitive and incapable of attracting foreign funds and the banking system of completely domestic nature.

Suggested Citation

  • Nawal Hussein Abbas Elhussein & Osama Eltayeb Elfaki Osman, 2019. "Exchange Rate fluctuations and Financial Performance of Banks: Evidence from Sudan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(12), pages 1-15, December.
    • Handle: RePEc:ibn:ijefaa:v:11:y:2019:i:12:p:15
    as

    Download full text from publisher

    File URL: http://www.ccsenet.org/journal/index.php/ijef/article/download/0/0/41232/42630
    Download Restriction: no
    File URL: http://www.ccsenet.org/journal/index.php/ijef/article/view/0/41232
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    2. Saona, Paolo, 2016. "Intra- and extra-bank determinants of Latin American Banks' profitability," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 197-214.
    3. repec:imx:journl:201602144 is not listed on IDEAS
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Joakim Westerlund, 2007. "Testing for Error Correction in Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
    6. M. Hashem Pesaran & Ron P. Smith, 1998. "Structural Analysis of Cointegrating VARs," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 471-505, December.
    7. Osuagwu, Eze, 2014. "Determinants of Bank Profitability in Nigeria," MPRA Paper 60948, University Library of Munich, Germany.
    8. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    9. Owoeye Taiwo & Ogunmakin Adeduro Adesola, 2013. "Exchange Rate Volatility and Bank Performance in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(2), pages 178-185.
    10. Vincent Okoth Ongore & Gemechu Berhanu Kusa, 2013. "Determinants of Financial Performance of Commercial Banks in Kenya," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 237-252.
    11. Fakhri J. Hasanov & Nigar Bayramli & Nayef Al-Musehel, 2018. "Bank-Specific and Macroeconomic Determinants of Bank Profitability: Evidence from an Oil-Dependent Economy," IJFS, MDPI, vol. 6(3), pages 1-21, September.
    12. Song l KAK LL ACARAVCI & Ahmet Ertugrul ALIM, 2013. "Turkish Banking Sector's Profitability Factors," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 27-41.
    13. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    14. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    15. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    16. Eissa A. Al-Homaidi & Mosab I. Tabash & Najib H. S. Farhan & Faozi A. Almaqtari, 2018. "Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1548072-154, January.
    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. Sulaiman, Saidu & Masih, Mansur, 2017. "Is liberalizing finance the game in town for Nigeria ?," MPRA Paper 95569, University Library of Munich, Germany.
    2. Chen, George S. & Yao, Yao & Malizard, Julien, 2017. "Does foreign direct investment crowd in or crowd out private domestic investment in China? The effect of entry mode," Economic Modelling, Elsevier, vol. 61(C), pages 409-419.
    3. Zhihui Lv & Amanda M. Y. Chu & Michael McAleer & Wing-Keung Wong, 2019. "Modelling Economic Growth, Carbon Emissions, and Fossil Fuel Consumption in China: Cointegration and Multivariate Causality," IJERPH, MDPI, vol. 16(21), pages 1-35, October.
    4. Chien-Chiang Lee & Chun-Ping Chang, 2006. "The Long-Run Relationship Between Defence Expenditures And Gdp In Taiwan," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(4), pages 361-385.
    5. Rıza BAYRAK & Halim TATLI, 2016. "Short and long term analysis of some factors effecting youth unemployment in Turkey," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(608), A), pages 229-242, Autumn.
    6. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.
    7. Andries, Natalia & Billon, Steve, 2016. "Retail bank interest rate pass-through in the euro area: An empirical survey," Economic Systems, Elsevier, vol. 40(1), pages 170-194.
    8. Taslima Akther & Mushfiqur Rahman & Md. Mufidur Rahman, 2023. "Factors influencing commercial bank profitability in Bangladesh: a panel data approach," Future Business Journal, Springer, vol. 9(1), pages 1-20, December.
    9. Rahman, Mohammad Chhiddikur, 2020. "Welfare Impact of Asymmetric Price Transmission on Bangladesh Rice Consumers," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 242248, January.
    10. Bashiri Behmiri, Niaz & Pires Manso, José R., 2012. "Does Portuguese economy support crude oil conservation hypothesis?," Energy Policy, Elsevier, vol. 45(C), pages 628-634.
    11. Tauã Vital & Daniel Morais De Souza & Jessica Faciroli, 2020. "Unemployment, poverty and police performance: an ARDL analysis of crime in São Paulo," Economics Bulletin, AccessEcon, vol. 40(1), pages 128-139.
    12. Rıza BAYRAK & Halim TATLI, 2016. "Short and long term analysis of some factors effecting youth unemployment in Turkey," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 229-242, Autumn.
    13. Bothwell Nyoni & Andrew Phiri, 2018. "The Electricity-growth Nexus in South Africa: Evidence from Asymmetric Cointegration and Co-feature Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 80-88.
    14. Adeel Saleem & Maqbool H. Sial & Ahmed Raza Cheema, 2023. "Does an asymmetric nexus exist between exports and economic growth in Pakistan? Recent evidence from a nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 56(1), pages 297-326, February.
    15. Lei Pan & Svetlana Maslyuk-Escobedo & Vinod Mishra, 2019. "Carry Trade Returns and Commodity Prices under Capital and Interest Rate Controls: Empirical Evidence from China," Monash Economics Working Papers 16-18, Monash University, Department of Economics.
    16. Balsalobre-Lorente, Daniel & Bekun, Festus Victor & Etokakpan, Mfonobong Udom & Driha, Oana M., 2019. "A road to enhancements in natural gas use in Iran: A multivariate modelling approach," Resources Policy, Elsevier, vol. 64(C).
    17. Rahman, Mohammad Chhiddikur, 2018. "Welfare Impact of Asymmetric Price Transmission on Bangladesh Rice Consumers," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 251114, January.
    18. Eftychia Nikolaidou & Sofoklis Vogiazas, 2014. "Credit Risk Determinants for the Bulgarian Banking System," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(1), pages 87-102, February.
    19. Czujack, Corinna & Flôres Junior, Renato Galvão & Ginsburgh, Victor, 1995. "On long-run price comovements between paintings and prints," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 269, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    20. Muhammad Shafiullah & Ravinthirakumaran Navaratnam, 2016. "Do Bangladesh and Sri Lanka Enjoy Export-Led Growth? A Comparison of Two Small South Asian Economies," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(1), pages 114-132, March.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    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:ibn:ijefaa:v:11:y:2019:i:12:p: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: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    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.