Work

Geopolitical risk, economic policy uncertainty, and bank stability in BRICS countries

Year: 2023

Type: article

Abstract: Global tensions and uncertainty in economic policy can cause structural change and disruption in the volatile sector of the economy. This study investigates the effects of geopolitical risk on bank stability and the role of economic policy uncertainty in this relationship in BRICS countries. We use the panel VAR and the two-step System GMM estimation technique. The study uses bank-level data from 105 commercial banks during 2009–2021, totaling 1,365 observations. The empirical results revealed that increased geopolitical risk and economic policy uncertainty reduce bank stability once other traditional drivers are controlled for. We found that geopolitical events tend to adversely influence the stability of banks. The results also reveal that the interaction between economic policy uncertainty and geopolitical risk has a negative significant impact on bank stability. More importantly, our findings are robust and offer critical policy interventions and implications for managers, policymakers, and investors in emerging markets.

Source: Cogent Economics & Finance

DOI: 10.1080/23322039.2023.2290368

Authors: Oluwaseyi Ebenezer Olalere, Janine Mukuddem-Petersen

Institution: University of Cape Town

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Peace, justice, and strong institutions

Open Access status: gold

Estimated APC paid: $1,165