Sovereign debt and financial sector nexus in the MENA region

What is it about?

This study aims to investigate the impact of bank claims on government on the stability of banking sectors in the Middle East and North Africa (MENA) region, in addition to several banking sector-specific characteristics and macroeconomic and institutional variables. The study’s purpose to provide a comprehensive understanding of how exposure to sovereign debt impacts bank stability and the possible prevalence of the sovereign debt-bank stability nexus in the MENA banking sectors.

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Why is it important?

The study’s key findings reveal that bank claims on government have constructive impact on banking stability. In contrast to the sovereign debt-bank stability nexus hypothesis, these claims do not negatively affect stability in the MENA region. Indeed, this finding challenges the conventional theoretical assumptions.