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

Financial Innovation

Table 9 Results of external factors affecting financial stability (advanced countries sample)

Variables	(1)	(2)
	Two-step System GMM	D–K S.E. Fixed Effect
	FSI	FSI
Financial Stability Index (t − 1)	0.863***
Financial Stability Index (t − 1)	(0.040)
Inflation	− 0.114***	− 0.210**
Inflation	(0.018)	(0.048)
Interest Rate	− 0.129*	− 0.092**
Interest Rate	(0.069)	(0.084)
Money Supply	0.007*	0.027*
Money Supply	(0.004)	(0.029)
GDP Growth	0.112***	0.102***
GDP Growth	(0.021)	(0.026)
Voice and Accountability	− 0.007	− 0.024
Voice and Accountability	(0.008)	(0.081)
PS &AV	0.001	0.016
PS &AV	(0.007)	(0.038)
Government Effectiveness	− 0.068***	− 0.057*
Government Effectiveness	(0.016)	(0.044)
Regulatory Quality	0.077***	0.110**
Regulatory Quality	(0.022)	(0.048)
Rule of Law	0.027*	0.070**
Rule of Law	(0.014)	(0.051)
Control of Corruption	− 0.001	− 0.038
Control of Corruption	(0.010)	(0.045)
Constant	0.024*	0.258*
Constant	(0.032)	(0.093)
Time Effect (i.year)	YES	YES
Observations	238	238
R-squared		0.572
AR1	− 3.423
AR1 p-value	0.000618
AR2	− 0.110
AR 2 p-value	0.912
Sargan Test	133.6
Hansen Test	25.40
Hansen(p-value) Test	0.161
No. of Instruments J-Statistics	24
Wald test-CHI2	57,709
Wald test-CHI p-value	0
Number of countries	34	34

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)