Aug 2026· Journal of Risk and Financial Management· 0 citations· 22 references
Abstract
This paper analyses the short-run dynamic relationship between monetary policy and banking market structure in Colombia during a period of post-pandemic inflation and aggressive policy tightening. Using monthly credit portfolio data for 2017–2024, we compute several concentration indicators (the Herfindahl–Hirschman Index (HHI), CRk ratios, and a dominance index) and employ three complementary identification strategies to evaluate the causal effect of monetary policy innovations on banking concentration. First, a structural VAR model identified through sign restrictions finds that contractionary shocks are associated with a short-run increase in banking concentration (median peak response: +0.60 HHI points at h = 3; 90% credible set: [+0.12, +1.16]), contrasting with the negative short-run response obtained under recursive reduced-form identification. Second, an extended VAR including credit portfolio growth as a mechanism variable confirms that contractionary shocks compress aggregate lending but do not generate robust, persistent changes in concentration. Third, local projections with regime-interaction terms formally test the nonlinear mechanisms discussed in the literature and find evidence of state-dependent transmission: the concentration response is larger in the low-inflation regime and attenuates during high-inflation episodes. All estimated effects are transitory and horizon-sensitive, reinforcing a cautious interpretation. The paper contributes new evidence from an emerging economy on the structural consequences of monetary policy and highlights the importance of identification assumptions in determining the direction of this effect.
The present paper aims to investigate the relationship between non-performing assets (NPAs) and profitability in Indian commercial banks. Focusing on the major economic disruptions, namely, the global financial crisis, demonetization and the COVID-19 pandemic, it examines their role in structurally reshaping the NPA-profitability nexus.
Our dataset comprised a balanced panel of 30 public and private sector commercial banks in India covering the period from 2004 to 2024. We applied Bai–Perron multiple breakpoint tests and Chow tests to identify regime shifts. Static panel regressions with Heteroskedasticity and Autocorrelation Consistent-corrected ordinary least squares and dynamic system generalized method of moments (GMM) estimations are employed to address heteroskedasticity, autocorrelation and endogeneity. The model incorporates bank-specific factors, market concentration indicators, macroeconomic variables and an interaction term between inflation and broad money (BM).
The findings reveal multiple statistically significant structural breaks corresponding to major economic shocks. NPAs consistently exert a significant negative impact on profitability across all regimes, while bank size positively influences return on assets, particularly during crisis periods. Market concentration yields mixed and regime-dependent effects. The interaction between inflation and BM significantly moderates profitability during transitional phases, highlighting the role of inflation-adjusted liquidity conditions in shaping bank performance.
The findings suggest that bank managers should strengthen credit risk monitoring and adopt proactive asset quality management, especially during periods of inflationary liquidity expansion. The policymakers and regulators can benefit from implementing countercyclical capital buffers and dynamic stress-testing frameworks tailored to structural shocks. However, our results should be interpreted with caution as we excluded foreign banks from our dataset and focused solely on Indian commercial banks, which may limit cross-country generalizability. Future research could extend the framework to comparative emerging-market settings.
To the best of our knowledge, this study is the first attempt to integrate structural break analysis with dynamic GMM estimation and to introduce inflation-adjusted liquidity as a moderating mechanism in the NPA-profitability relationship in an emerging economy context.
Faiza Rehman, Mohammad Ammar Ahsan, S. Akhtar et al.· Journal of Financial Regulat...· 0 citations
Identifying credit supply shocks separately from demand shocks remains a central challenge in the empirical credit-channel literature, particularly in emerging economies. We use the Brazilian Central Bank's Quarterly Credit Conditions Survey (PTC), launched in 2011, which records the lending standards reported by financial institutions and provides a direct measure of credit-supply conditions independent of price. We embed this variable in a hierarchical Bayesian VAR estimated on quarterly data for 2011Q1–2025Q4. A tightening in lending standards is followed by a sustained contraction in non-earmarked credit, and standards account for about a quarter of credit’s forecast-error variance at the twelve-quarter horizon. Impulse responses, variance decomposition, and Granger tests point in the same direction. Surveys like the PTC provide an early indicator of credit supply conditions, with implications for the conduct of monetary policy in emerging economies.
Jose Antonio dos Santos Rocha, Marcos Roberto Vasconcelos· Journal of Economic Analysis· 0 citations
This study investigates the dynamic relationship between financial deepening and economic growth in Nigeria using an Error Correction Specification (ECS) framework. Motivated by the persistent disconnect between financial sector reforms and real sector productivity, the research employs time-series data covering 1980-2024. Methodologically, the study utilizes Augmented Dickey-Fuller and Phillips-Perron unit root tests, Johansen multivariate cointegration, pairwise Granger causality tests, and a Parsimonious Error Correction Model (PECM). The empirical findings provide robust support for the supply-leading hypothesis, revealing unidirectional causality from financial deepening proxies specifically broad money supply ratio (M2Y) and private sector credit (PRIVY) to economic growth. The Johansen cointegration results confirm a stable, long-run equilibrium relationship among variables, while the significant error-correction term indicates a steady annual convergence rate toward equilibrium following short-run shocks. Furthermore, while short-term monetary adjustments exhibit transient frictions, long-run estimates underscore that sustained financial depth and capital stock accumulation significantly enhance economic performance. Conversely, unmanaged population pressures and structural credit bottlenecks continue to hinder optimal output. The study concludes that financial deepening is a vital catalyst for Nigerian development, provided qualitative credit allocation and institutional efficiency are optimized. Policy recommendations emphasize targeted credit to productive sectors, enhanced asset quality management, and strategic infrastructure investment to transform financial depth into inclusive economic expansion.
C. Ibidapo· International Journal of Hum...· 0 citations
This paper examines how economic downturns and currency movements affect the quality of bank loans in Central, Eastern, and Southeastern Europe, using annual data for 14 national banking systems over 2008–2023. We estimate a bias-corrected dynamic fixed-effects model, verify inference with Driscoll–Kraay, cluster-robust, and wild cluster bootstrap procedures, run formal threshold tests, and conduct scenario simulations. Credit risk is highly persistent. The bias-corrected autoregressive coefficient of 0.944 implies a half-life of 12.0 years, although the bootstrap confidence interval of 0.601 to 1.048 does not rule out near-unit-root behavior. Exchange-rate depreciation predicts higher non-performing loan (NPL) ratios and survives both the strictest few-cluster test (p = 0.028) and a correction for euro-adoption breaks, while lower real GDP per capita growth is marginal under the same test (p = 0.060). Threshold tests that re-estimate the threshold in every bootstrap replication do not reject linearity in any of 14 configurations (minimum p-value of 0.071). Institutional quality does not measurably moderate the exchange-rate channel. A severe combined adverse scenario raises the projected NPL ratio from 6.54 to 12.32 percent over five years (90 percent interval: 8.2 to 24.6 percent). Together, the surviving channels and the disciplined null results delimit nonlinear transmission in emerging Europe.
Ivana Miklošević, Andreja Todorović, Andrija Popović· Journal of Risk and Financia...· 0 citations
This study examines whether monetary tightening amplifies the negative effect of VIX shocks on U.S. bank stock returns. Using daily public data from January 2010 to March 2026, the analysis constructs a panel of returns for four exchange-traded funds: KBE, KRE, XLF and SPY. Large increases in the CBOE Volatility Index are treated as episodes of market fear and risk repricing. A tightening regime is defined as a trading day on which the effective federal funds rate has increased by at least 25 basis points over the previous 90 trading days. The baseline factor-adjusted regressions show that the interaction between VIX shocks and tightening regimes is significantly negative. In the preferred KBE specification, a VIX shock during a tightening regime is associated with an additional daily excess return of approximately -0.278 percentage points. Heterogeneity tests indicate that this effect is concentrated in bank ETFs, especially the regional-bank ETF KRE, and is not significant for the broader financial-sector ETF XLF or the market ETF SPY. Event-window evidence shows lower five-day cumulative excess returns for KBE and KRE after VIX shocks in tightening regimes. The findings provide conditional asset-pricing evidence on bank equity risk under monetary tightening.
Junhe Guan· Advances in Economics, Manag...· 0 citations
This study investigated the dynamic relationships determining inflation control in Nigeria, focusing on the interactions between monetary instruments, central bank autonomy, and fiscal policy. Utilizing annual time-series data spanning 1981 to 2023, the study employs the Autoregressive Distributed Lag (ARDL) bounds testing technique to evaluate short-run and long-run macroeconomic dynamics. The ARDL estimations reveal that the contemporaneous monetary policy rate has an insignificant short-run effect, while its one-year lag significantly reduces inflation, confirming policy transmission frictions. Broad money supply (M2) growth exerts a highly significant positive impact on inflation across both horizons, strongly validating the monetarist hypothesis. Regarding institutional design, central bank independence (CBI) and its one-year lag significantly lower short-run inflation by anchoring credibility; however, this effect becomes positive and insignificant in the long run, illustrating the operational limits of legal autonomy under persistent fiscal dominance. Finally, fiscal deficits exhibit a dual short-run effect – contemporaneous deficits reduce inflation while lagged deficits increase it – but exert a significant negative impact on long-run price levels. This long-run negative relationship supports the productive capital expenditure hypothesis, suggesting that deficit financing cools structural cost-push inflation when channelled into expanding supply capacity. Consequently, the study recommends establishing an institutionalized Fiscal-Monetary Coordination Council, enforcing strict caps on central bank credit to the government, transitioning toward an explicit inflation-targeting framework, and legally restricting deficit financing to high-yield infrastructure.
E. Mbobo, U. Effiong· African Journal of Commercia...· 0 citations