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The Determinants Of Financial Instability In Emerging Countries

Author

Listed:
  • DUC HONG VO

    (Business and Economics Research Group, 97 Vo Van Tan Street, District 3, Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam)

  • VUONG MINH NGUYEN

    (Business and Economics Research Group, 97 Vo Van Tan Street, District 3, Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam)

  • PHAT QUANG-TON LE

    (#x2020;Vietnam–Netherlands Program, University of Economics Ho Chi Minh City, Ward 10, Phu Nhuan District, Ho Chi Minh City, Vietnam)

  • THACH NGOC PHAM

    (Business and Economics Research Group, 97 Vo Van Tan Street, District 3, Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam)

Abstract
Financial integration has greatly contributed to economic growth and development around the globe, in particular for developing countries. However, this process of financial integration has also provided threats in the form of instability which threaten the progress of economic growth and development. The objective of this study is to examine a set of indicators which are valid and indicative of financial instability in the case of developing countries. A panel data of 17 developing countries during the period 2000–2017 is utilized. The credit growth is used as a proxy of financial instability. Standard methods such as the pooled OLS, fixed effect model and random effect model are considered to ensure robustness. Empirical findings from this study indicate that the key determinants of financial instability in developing countries including Vietnam include the GDP growth rate, inflation rate, the growth rate of base money, the change in foreign exchange reserves, lending interest rate, returns in the stock market and the return on equity ratio of the banking sector. Findings from this study appear to support the views of Post-Keynesians in relation to the mechanism leading to financial instability, in particular for developing markets.

Suggested Citation

  • Duc Hong Vo & Vuong Minh Nguyen & Phat Quang-Ton Le & Thach Ngoc Pham, 2019. "The Determinants Of Financial Instability In Emerging Countries," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 14(02), pages 1-19, June.
    • Handle: RePEc:wsi:afexxx:v:14:y:2019:i:02:n:s2010495219500106
    DOI: 10.1142/S2010495219500106
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    Citations

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    Cited by:

    1. Babar Hussain & Muhammad Naveed Tahir & Bahawal Khan, 2022. "Impact of Financial Development, Financial Liberalization and Economic Growth on Financial Instability: Evidence from Panel Data," Journal of Economic Impact, Science Impact Publishers, vol. 4(2), pages 142-151.
    2. Maroun, George & Fromentin, Vincent, 2024. "Financial instability in Lebanon: Do the liquidity creation and performance of banks matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 96(C).
    3. 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.
    4. Kyei, Collins Baffour & Cantah, William Godfred & Junior Owusu, Peterson, 2023. "Effect of commodity prices on financial soundness; insight from adaptive market hypothesis in the Ghanaian setting," Resources Policy, Elsevier, vol. 86(PA).
    5. JIMA, Meshesha Demie & MAKONI, Patricia L., 2022. "Determinants Of Financial Stability In Sub-Saharan Africa," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 26(3), pages 55-75, September.
    6. Ahmet Ihsan Kaya & Lutfi Erden, 2023. "Capital‐flow volatility in emerging markets: A panel GARCH approach," International Finance, Wiley Blackwell, vol. 26(2), pages 172-188, August.

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