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Impact of Financial stability on economic growth in Nigeria

Author

Listed:
  • Ozili, Peterson K
Abstract
Economic growth is reflected in SDG8 of the sustainable development goals. Financial stability has been identified as a factor promoting economic growth. However, there is little evidence on the effect of financial stability on economic growth in Nigeria. This study empirically examines the effect of financial stability on economic growth in Nigeria from 1993 to 2017. The results show a positive relationship between financial stability and economic growth in Nigeria. Specifically, the result shows that a high ZSCORE, which reflects low insolvency risk, has a positive effect on economic growth. Similarly, fewer nonperforming loans improve economic growth in Nigeria. In contrast, capital adequacy was found to have a negative effect on economic growth in Nigeria.

Suggested Citation

  • Ozili, Peterson K, 2024. "Impact of Financial stability on economic growth in Nigeria," MPRA Paper 120776, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:120776
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    File URL: https://mpra.ub.uni-muenchen.de/120776/1/MPRA_paper_120776.pdf
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    References listed on IDEAS

    as
    1. Creel, Jérôme & Hubert, Paul & Labondance, Fabien, 2015. "Financial stability and economic performance," Economic Modelling, Elsevier, vol. 48(C), pages 25-40.
    2. Laetitia Lepetit & Frank Strobel & Thu Ha Tran, 2021. "An alternative Z-score measure for downside bank insolvency risk," Applied Economics Letters, Taylor & Francis Journals, vol. 28(2), pages 137-142, January.
    3. Shahzad Ijaz & Arshad Hassan & Amine Tarazi & Ahmad Fraz, 2020. "Linking Bank Competition, Financial Stability, And Economic Growth," Post-Print hal-02475572, HAL.
    4. Alsamara, Mouyad & Mrabet, Zouhair & Jarallah, Shaif & Barkat, Karim, 2019. "The switching impact of financial stability and economic growth in Qatar: Evidence from an oil-rich country," The Quarterly Review of Economics and Finance, Elsevier, vol. 73(C), pages 205-216.
    5. repec:hal:spmain:info:hdl:2441/5euk7d0f8t81prfu1k2sspdcok is not listed on IDEAS
    6. Jayakumar, Manju & Pradhan, Rudra P. & Dash, Saurav & Maradana, Rana P. & Gaurav, Kunal, 2018. "Banking competition, banking stability, and economic growth: Are feedback effects at work?," Journal of Economics and Business, Elsevier, vol. 96(C), pages 15-41.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial stability; ZSCORE; economic growth; Nigeria;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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