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Journals / Journal of Life Economics / 2021 / Cilt: 8 - Sayı: 3

Impact of credit risk and profitability on liquidity shocks of Namibian banks: an application of the structural VAR model

Albert V. KAMUİNJO
Pages
349–360
Publication Date
2021-07-31
DOI
—
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AI Summary & Key Takeaways

AI Insight
⚡ TL;DR(Too Long; Didn't Read)

By auditing liquidity data between 2009 and 2018, empirical results showed that liquidity risk is caused by a combination of structural shocks.

📌 3 Key Takeaways

🎯
Objective & Hypothesis:The main purpose of this paper was to investigate the relationship between banks’ credit risk and profitability and liquidity shocks in Namibia for the period 2009 to 2018 using the SVAR model.
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Key Findings & Data:By auditing liquidity data between 2009 and 2018, empirical results showed that liquidity risk is caused by a combination of structural shocks.
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Conclusion & Impact:Reforming assets quality policies and earnings quality policies can be valuable policy tools to minimize liquidity shortages and avoid insolvent banks in Namibia.
🔬Design:Modeling & Simulation
📍Scope:2009 Verileri
⚙️Variables:credit risk · namibian banking industry · camels

Abstract

The main purpose of this paper was to investigate the relationship between banks’ credit risk and profitability and liquidity shocks in Namibia for the period 2009 to 2018 using the SVAR model. In estimating the SVAR regression model, granger causality, impulse-response functions and forecast error variance decomposition were employed and evaluated. The sample consisted of Namibian commercial banks. By auditing liquidity data between 2009 and 2018, empirical results showed that liquidity risk is caused by a combination of structural shocks. The granger causality, impulse-response functions and forecast error variance decomposition documented that credit risk (non-performing loans) is key factor affecting liquidity conditions in Namibia in the medium to long run. In addition, the empirical results showed that quality earnings (ROA) have minimal impact on liquidity conditions in the short run. Reforming assets quality policies and earnings quality policies can be valuable policy tools to minimize liquidity shortages and avoid insolvent banks in Namibia.

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Cite This Article

KAMUİNJO, A. V. (2021). Impact of credit risk and profitability on liquidity shocks of Namibian banks: an application of the structural VAR model. Journal of Life Economics, Cilt: 8 - Sayı: 3, 349–360. https://ajindex.com/articles/381521

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