Abstract
This paper investigates the factors of the banking stability in Haiti, over the period of 1996 to 2017, using macroeconomic, government and institutions, banking system, and economic freedom factors measured respectively by GDP growth and exchange rate, political stability index and regulatory quality index, bank lending-deposit interest rate spread, property rights index and investment freedom index. To carry out the analysis, the yearly data have been transformed into quarterly data, giving a sample of 88 observations. By means of OLS regressions, six statistical models have been specified. Banking stability which is the response variable is measured by the z-score. The results suggest that macroeconomic and economic freedom factors have positive effects on the banking stability, while the banking system factor impacts negatively the banking stability in Haiti. Conversely, government and institutions factor has no significant impact on the Haitian banking stability. When it comes to assess the impact of each explanatory variable (GDP growth, exchange rate, political stability index, regulatory quality index, bank lending- deposit interest rate spread, property rights index and investment freedom index) on banking stability, the results show that they all have significant effects on the Haitian banking stability. However, when all of the independent variables are analyzed in one multiple regression together, the political stability index is not statistically significant. The findings of this study have important implications for decision makers. Governments and the Central Bank should intensity their efforts in creating a promising macroeconomic environment, adopting effective monetary policy, reducing restrictions in investment and reinforcing laws to protect property rights, in order to maintain or improve banking stability in Haiti.
Highlights
The banking sector plays a vital role in the functioning of the economy of a country through intermediation
This paper investigates the factors of the banking stability in Haiti, over the period of 1996 to 2017, using macroeconomic, government and institutions, banking system, and economic freedom factors measured respectively by Gross Domestic Product (GDP) growth and exchange rate, political stability index and regulatory quality index, bank lending-deposit interest rate spread, property rights index and investment freedom index
To carry out the analysis, the yearly data have been transformed into quarterly data, giving a sample of 88 observations
Summary
The banking sector plays a vital role in the functioning of the economy of a country through intermediation. The banking sector stands between savers and borrowers, by taking funds from savers by means of deposits to lend them to those who wish to borrow, be they individuals, households, businesses or governments In addition to these two traditional banking services, there are other forms of intermediation. It is critical that banks can cover losses and fulfil their payment obligations To ensure their well-functioning, banks must comply with strict regulatory requirements. The second purpose is to ensure that financial services companies meet their primary fiduciary tasks Both of duties fall under a government’s judiciary to enforce contracts and protect its citizens against fraud by requiring financial institutions to publish their financial statements verified by an independent audit, in order to help depositors, borrowers, and other financial actors to make informed decisions
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