Volume 13, Issue 4 (Fall 2018)
J. Mon. Ec. 2018, 13(4): 501-523 |
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Nadri K, Ebrahimi S, Fadaie A. Assessment of Financial Stability in the Banking Sector in Iran. J. Mon. Ec. 2018; 13 (4) :501-523
URL: http://jme.mbri.ac.ir/article-1-326-en.html
URL: http://jme.mbri.ac.ir/article-1-326-en.html
1- Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran
Abstract: (1888 Views)
The aims of the present study are developing a financial stability index (FSI) using banking indices to measure financial stability in Iran, and examining the relationship between financial stability and macroeconomic variables for policymaking. To these ends, we have employed principal-component analysis, out of sample forecasting, Autoregressive Integrated Moving Average (ARIMA) method, and Vector Error Correction Model (VECM). The monthly data period is spanning 2007:3 through 2017:2. We find evidence of one cointegrating vector. According to the cointegration test, there is a long-run relationship running from inflation, Gross Domestic Product (GDP) growth rate, and unemployment to FSI. Also, the results of the Engle-Granger test indicate
bidirectional causality between FSI and unemployment. Forecast evaluation shows that VECM-based FSI prediction is more accurate than the ARIMA model.
bidirectional causality between FSI and unemployment. Forecast evaluation shows that VECM-based FSI prediction is more accurate than the ARIMA model.
Keywords: Financial Stability Index, Principal-Component Analysis, Out of Sample Forecasting, ARIMA, VECM, Macroeconomic Variables
Type of Study: Original Research - Theoric |
Subject:
Economics
Received: 25 Oct 2018 | Accepted: 16 Oct 2019 | Published: 12 Nov 2019
Received: 25 Oct 2018 | Accepted: 16 Oct 2019 | Published: 12 Nov 2019
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