Reviewing the consequence of trade openness and financial openness on banking stability in developing countries
The global economy has fostered a dynamic environment of economic globalization, leading to amplified interconnectedness, integration, and worldwide influence in both commercial transactions and monetary activities. This occurrence emphasizes the vital role of liberalizing capital and international...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2024-02-01
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| Series: | Banks and Bank Systems |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19685/BBS_2024_01_Hidayati.pdf |
| _version_ | 1797290141053616128 |
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| author | Sri Hidayati Taufiq Marwa Sri Andaiyani Abukosim |
| author_facet | Sri Hidayati Taufiq Marwa Sri Andaiyani Abukosim |
| author_sort | Sri Hidayati |
| collection | DOAJ |
| description | The global economy has fostered a dynamic environment of economic globalization, leading to amplified interconnectedness, integration, and worldwide influence in both commercial transactions and monetary activities. This occurrence emphasizes the vital role of liberalizing capital and international trade in economic discussions, particularly in emerging economies where banking-centric systems wield considerable influence. The objective of this study is to investigate the correlation between trade liberalization and financial inclusivity, specifically concerning the resilience of the banking industry in developing nations throughout the period of 2010–2020. Utilizing the dynamic data model of Arellano-Bond’s Generalized Method of Moment Estimator, this study yields a significant revelation. The interaction between trade openness and financial transparency exerts a noticeable and advantageous impact on banking stability, with each 1% increase in openness resulting in a remarkable improvement of 98.9445 in Net Interest Margin, 116.2575 in Z score, and 119.9189 in Non-Performing Loans. Consequently, this investigation confirms the presence of a diversification effect on stability while concurrently applying the concept of voltage fragility. In essence, trade openness propels the banking sector toward heightened competitiveness due to increased demand from local businesses, while financial openness fosters heightened competition within the credit market. |
| first_indexed | 2024-03-07T19:16:08Z |
| format | Article |
| id | doaj.art-75aac351689f494cb94f0dbb75c31f17 |
| institution | Directory Open Access Journal |
| issn | 1816-7403 1991-7074 |
| language | English |
| last_indexed | 2024-03-07T19:16:08Z |
| publishDate | 2024-02-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj.art-75aac351689f494cb94f0dbb75c31f172024-02-29T13:49:05ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742024-02-0119111212510.21511/bbs.19(1).2024.1019685Reviewing the consequence of trade openness and financial openness on banking stability in developing countriesSri Hidayati0https://orcid.org/0000-0002-4275-0059Taufiq Marwa1https://orcid.org/0000-0001-6975-8942Sri Andaiyani2https://orcid.org/0000-0002-4275-0059Abukosim3https://orcid.org/0009-0005-3341-1740Student, Department of Development Economics, Sriwijaya University, IndonesiaPh.D., Professor, Department of Development Economics, Sriwijaya University, IndonesiaM.S.E., Assistant Professor, Department of Development Economics, Sriwijaya University, IndonesiaPh.D., Associate Professor, Department of Development Economics, Sriwijaya University, IndonesiaThe global economy has fostered a dynamic environment of economic globalization, leading to amplified interconnectedness, integration, and worldwide influence in both commercial transactions and monetary activities. This occurrence emphasizes the vital role of liberalizing capital and international trade in economic discussions, particularly in emerging economies where banking-centric systems wield considerable influence. The objective of this study is to investigate the correlation between trade liberalization and financial inclusivity, specifically concerning the resilience of the banking industry in developing nations throughout the period of 2010–2020. Utilizing the dynamic data model of Arellano-Bond’s Generalized Method of Moment Estimator, this study yields a significant revelation. The interaction between trade openness and financial transparency exerts a noticeable and advantageous impact on banking stability, with each 1% increase in openness resulting in a remarkable improvement of 98.9445 in Net Interest Margin, 116.2575 in Z score, and 119.9189 in Non-Performing Loans. Consequently, this investigation confirms the presence of a diversification effect on stability while concurrently applying the concept of voltage fragility. In essence, trade openness propels the banking sector toward heightened competitiveness due to increased demand from local businesses, while financial openness fosters heightened competition within the credit market.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19685/BBS_2024_01_Hidayati.pdfbanking stabilitygeneralized method of momentliberalizationpanel data |
| spellingShingle | Sri Hidayati Taufiq Marwa Sri Andaiyani Abukosim Reviewing the consequence of trade openness and financial openness on banking stability in developing countries Banks and Bank Systems banking stability generalized method of moment liberalization panel data |
| title | Reviewing the consequence of trade openness and financial openness on banking stability in developing countries |
| title_full | Reviewing the consequence of trade openness and financial openness on banking stability in developing countries |
| title_fullStr | Reviewing the consequence of trade openness and financial openness on banking stability in developing countries |
| title_full_unstemmed | Reviewing the consequence of trade openness and financial openness on banking stability in developing countries |
| title_short | Reviewing the consequence of trade openness and financial openness on banking stability in developing countries |
| title_sort | reviewing the consequence of trade openness and financial openness on banking stability in developing countries |
| topic | banking stability generalized method of moment liberalization panel data |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19685/BBS_2024_01_Hidayati.pdf |
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