Analyzing the Impact of Macroeconomic Variables on Financial Stability: Evidence from South Asian Economies

Abstract

This research examines whether macroeconomic variables disturb the financial stability of SAARC countries in 1996-2022 using panel ARDL approach. We shape the financial stability as the dependent variable, and we have developed a PCA index of financial stability (principal component analysis). This study contains of macroeconomic models with a wide choice of possibly related variables for financial stability, using financial flows, financial openness, macroeconomic stability, exchange rate and economic growth on a sample of five countries between 1996 and 2022. Our experimental suggestion proposes that most of the macroeconomic variables have a positive impact on financial stability. Therefore, our outcomes support the view that the development of macro-economic policies and political programs should be part of financial improvement. All these variables may enhance the financial stability of the countries which are under consideration.