The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries

This study examines the impact of commodity price shocks on the banking sector stability of 18 African commodity-exporting economies using an unbalanced panel dataset spanning a 16-year period from 2000–2015. The study on the impact of commodity price shocks on African commodity-exporting economies’...

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Main Authors: Nicholas Ngepah, Margarida Liandra Andrade da Silva, Charles Shaaba Saba
Format: Article
Language:English
Published: MDPI AG 2022-04-01
Series:Economies
Subjects:
Online Access:https://www.mdpi.com/2227-7099/10/4/91
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author Nicholas Ngepah
Margarida Liandra Andrade da Silva
Charles Shaaba Saba
author_facet Nicholas Ngepah
Margarida Liandra Andrade da Silva
Charles Shaaba Saba
author_sort Nicholas Ngepah
collection DOAJ
description This study examines the impact of commodity price shocks on the banking sector stability of 18 African commodity-exporting economies using an unbalanced panel dataset spanning a 16-year period from 2000–2015. The study on the impact of commodity price shocks on African commodity-exporting economies’ banking sectors was estimated using a panel fixed effects model. The empirical findings indicate that commodity price shocks increase bank credit risk (non-performing loans) and, thus, pose a risk to the banking sector stability of African commodity-exporting economies. The results for the disaggregated shocks reveal that both positive and negative shocks weaken banking sector stability. In addition, commodity price shocks are discovered to decrease credit extension to the private sector, highlighting an additional channel through which the impact of commodity price shocks may be perpetuated to the real economy.
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spelling doaj.art-9a47cff5b1e74810b9d98ab6bead908d2023-12-01T01:39:30ZengMDPI AGEconomies2227-70992022-04-011049110.3390/economies10040091The Impact of Commodity Price Shocks on Banking System Stability in Developing CountriesNicholas Ngepah0Margarida Liandra Andrade da Silva1Charles Shaaba Saba2Auckland Park Kingsway Campus, University of Johannesburg, Johannesburg 2006, South AfricaAuckland Park Kingsway Campus, University of Johannesburg, Johannesburg 2006, South AfricaAuckland Park Kingsway Campus, University of Johannesburg, Johannesburg 2006, South AfricaThis study examines the impact of commodity price shocks on the banking sector stability of 18 African commodity-exporting economies using an unbalanced panel dataset spanning a 16-year period from 2000–2015. The study on the impact of commodity price shocks on African commodity-exporting economies’ banking sectors was estimated using a panel fixed effects model. The empirical findings indicate that commodity price shocks increase bank credit risk (non-performing loans) and, thus, pose a risk to the banking sector stability of African commodity-exporting economies. The results for the disaggregated shocks reveal that both positive and negative shocks weaken banking sector stability. In addition, commodity price shocks are discovered to decrease credit extension to the private sector, highlighting an additional channel through which the impact of commodity price shocks may be perpetuated to the real economy.https://www.mdpi.com/2227-7099/10/4/91commodity price shocksbanking sector stabilitypanel dataAfrica
spellingShingle Nicholas Ngepah
Margarida Liandra Andrade da Silva
Charles Shaaba Saba
The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries
Economies
commodity price shocks
banking sector stability
panel data
Africa
title The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries
title_full The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries
title_fullStr The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries
title_full_unstemmed The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries
title_short The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries
title_sort impact of commodity price shocks on banking system stability in developing countries
topic commodity price shocks
banking sector stability
panel data
Africa
url https://www.mdpi.com/2227-7099/10/4/91
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