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

Nicholas Ngepah; Margarida Liandra Andrade da Silva; Charles Shaaba Saba

doi:10.3390/economies10040091

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

Nicholas Ngepah
, Margarida Liandra Andrade da Silva
, Charles Shaaba Saba

School of Economics

University of Johannesburg

Research output: Contribution to journal › Article › peer-review

8 Citations (Scopus)

Abstract

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 commodityexporting 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.

Original language	English
Article number	91
Journal	Economies
Volume	10
Issue number	4
DOIs	https://doi.org/10.3390/economies10040091
Publication status	Published - Apr 2022

Keywords

Africa
banking sector stability
commodity price shocks
panel data

ASJC Scopus subject areas

Development
Economics, Econometrics and Finance (miscellaneous)

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10.3390/economies10040091

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title = "The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries",

abstract = "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 commodityexporting economies{\textquoteright} 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.",

keywords = "Africa, banking sector stability, commodity price shocks, panel data",

author = "Nicholas Ngepah and \{da Silva\}, \{Margarida Liandra Andrade\} and Saba, \{Charles Shaaba\}",

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year = "2022",

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doi = "10.3390/economies10040091",

language = "English",

volume = "10",

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T1 - The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries

AU - Ngepah, Nicholas

AU - da Silva, Margarida Liandra Andrade

AU - Saba, Charles Shaaba

PY - 2022/4

Y1 - 2022/4

N2 - 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 commodityexporting 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.

AB - 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 commodityexporting 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.

KW - Africa

KW - banking sector stability

KW - commodity price shocks

KW - panel data

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DO - 10.3390/economies10040091

M3 - Article

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SN - 2227-7099

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JF - Economies

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ER -

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

Abstract

Keywords

ASJC Scopus subject areas

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