Macro Credit Risk Stress Testing in Tanzanian Banking Sector
A Global Vector Autoregressive (GVAR) Approach
Bibliographic Data
| ID | 21737449 |
|---|---|
| Authors | Khadijah Jumanne Kishimba (0009-0005-5875-1522, University of KwaZulu-Natal), Joseph Olorunfemi Akande (0000-0001-8445-8905, Walter Sisulu University), Paul-Francois Muzindutsi (0000-0002-4819-8218, University of KwaZulu-Natal, corresponding author) |
| Year | 2024 |
| Volume | 25 |
| Issue | 3 |
| Pages | 531-554 |
| Publication date | 2024-07-02 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of African Business (JOURNAL) |
| Journal identifiers | ISSN: 1522-8916 • E-ISSN: 1522-9076 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/15228916.2023.2215579 |
| OpenAlex | W4382067364 |
| Language | EN |
| References cited | 39 |
This study conducted a macro credit risk stress testing framework for assessing the impact of global transmissions on Tanzania’s banking sector from Q12006 to Q42020, using the Global Vector Autoregressive Regression (GVAR) model with seven countries. The adoption of the GVAR model enabled us to take into account non-linear relationships, capture business cycle effects and the global interaction. This study focused on assessing the projected responsiveness of Tanzania’s credit risk to shocks originating from domestic, global and foreign variables in relation to USA, China and South Africa. This study found that the global transmissions have an impact on the Tanzanian banking sector, with a significant exposure witnessed from the increase in the crude oil price index. On a domestic level, the results revealed that projected inflation rate shocks have a more responsive impact on banking sector credit risk compared to real GDP growth. In addition, GDP growth shocks from foreign countries have a slight impact on the banking sector compared to exchange rate risk transmission, given the growing global interconnectedness, thus leading to a spillover effect on the banking sector. Conclusively, Tanzania’s banking sector is not invulnerable to domestic, foreign and global shocks, and therefore warrants monitoring to enhance resilience
Business · Credit risk · Economics · Emerging markets · Exchange rate · Financial system · Macroeconomics · Monetary economics · Spillover effect · Tanzania · Banking stability, regulation, efficiency · Credit Risk and Financial Regulations · Market Dynamics and Volatility · Finance
| Highly cited | No |
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