Is there a relationship between financial stability and macroeconomic variables? OECD example

Abstract

Financial stability has many determinants. These include various macroeconomic variables, the soundness and infrastructure of financial institutions, and the monetary policies pursued. This study aims to examine the relationship between financial stability and economic growth, interest rates, inflation rates, and interest rates of OECD member countries Z-score provides important information about the financial stability of a country's banking system by comparing its capital and returns and the volatility of returns. The study's data set consists of 15 OECD constituent countries. The data range of the study was determined as the period 2000 -2021. Panel data analysis is used in this study. Dumitrescu and Hurlin causality test results from gross domestic, inflation, and interest rate variables to the Z-score. Also, there is bi-causality from the Z-score to gross domestic, inflation, and interest rate variables.