Nexus of governance, macroeconomic conditions, and financial stability of banks: a comparison of developed and emerging countries

Financial Innovation

Table 7 Results of external factors affecting financial stability (GMM Full Sample Countries)

Variables	(1)	(2)
	Two-step Sys-GMM	D–K S.E. Fixed Effect
	FSI	FSI
Financial Stability Index (t − 1)	0.806***
Financial Stability Index (t − 1)	(0.003)
Inflation	− 0.021***	− 0.059***
Inflation	(0.001)	(0.012)
Interest Rate	0.006*	0.038**
Interest Rate	(0.002)	(0.016)
Money Supply	− 0.002	− 0.028
Money Supply	(0.002)	(0.029)
GDP Growth	0.066***	0.075***
GDP Growth	(0.002)	(0.013)
Voice & Accountability	0.004***	0.032*
Voice & Accountability	(0.001)	(0.023)
PA &AV	0.010***	0.059***
PA &AV	(0.001)	(0.014)
Government Effectiveness	0.004	0.004
Government Effectiveness	(0.004)	(0.025)
Regulatory Quality	0.003	0.011
Regulatory Quality	(0.002)	(0.029)
Rule of Law	− 0.044***	− 0.095***
Rule of Law	(0.003)	(0.030)
Control of Corruption	0.018***	0.027**
Control of Corruption	(0.002)	(0.026)
Constant	0.048***	0.275***
Constant	(0.002)	(0.023)
Time Effect (i.year)	YES	YES
Observations	854	854
R-squared		0.368
AR1	− 4.064
AR1 p-value	0.00004.82
AR2	− 0.746
AR 2 p-value	0.456
Sargan Test	336.3
Hansen Test	109.8
Hansen (p-value) Test	0.219
No. of Instruments J-Statistics	43
Wald test-CHI2	467,487
Wald test-CHI p-value	0
Number of countries	122	122

Robust Standard errors in parentheses, ***p < 0.01, **p < 0.05, *p < 0.1 indicate significance at 1%, 5%, and 10% levels, respectively, Used Stata outreg2, xtabond2 command— (Roodman 2009)