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Domestic Arrears and Financial Stability: The Role of Institutional Factors

Author

Listed:
  • William Godfred Cantah

    (University of Cape Coast)

  • William Gabriel Brafu-Insaidoo

    (University of Cape Coast)

  • Eric Amoo Bondzie

    (University of Cape Coast)

Abstract

This study examines the impact of government payment arrears accumulation on the stability of the banking industry, taking into account the role played by institutional quality in 17 selected SSA countries. The study employed a panel threshold regression model using data from World Bank and International Monetary Fund databases between 2005 and 2018. The key finding from the analysis indicates that arrears accumulation adversely affects banking sector stability, but with institutional quality, the effect is reduced. As a result, public policy should aim at clearing arrears and improving the quality of institutions.

Suggested Citation

  • William Godfred Cantah & William Gabriel Brafu-Insaidoo & Eric Amoo Bondzie, 2022. "Domestic Arrears and Financial Stability: The Role of Institutional Factors," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 48(1), pages 45-62, January.
    • Handle: RePEc:pal:easeco:v:48:y:2022:i:1:d:10.1057_s41302-021-00195-7
    DOI: 10.1057/s41302-021-00195-7
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    References listed on IDEAS

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    1. Bikker, J.A. & Metzemakers, P.A.J., 2005. "Bank provisioning behaviour and procyclicality," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(2), pages 141-157, April.
    2. Ozili, Peterson K, 2018. "Banking Stability Determinants in Africa," MPRA Paper 101825, University Library of Munich, Germany.
    3. Mr. Garry J. Schinasi, 2004. "Defining Financial Stability," IMF Working Papers 2004/187, International Monetary Fund.
    4. Peterson K. Ozili, 2018. "Banking stability determinants in Africa," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 14(4), pages 462-483, May.
    5. Sailendra Pattanayak, 2016. "Expenditure Control: Key Features, Stages, and Actors," IMF Technical Notes and Manuals 2016/002, International Monetary Fund.
    6. Sailendra Pattanayak, 2016. "Expenditure Control; Key Features, Stages, and Actors," IMF Technical Notes and Manuals 16/02, International Monetary Fund.
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    Cited by:

    1. Evans Kulu, 2023. "Financial stability gap and private investment nexus: Evidence from sub‐Saharan Africa," African Development Review, African Development Bank, vol. 35(2), pages 239-250, June.

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    More about this item

    Keywords

    Financial stability; Domestic arrears; Institutional quality; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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