What drives banks’ appetite for sovereign debt in CEE countries?

Buljan, Antonija; Deskar-Škrbić, Milan; Dumičić, Mirna

doi:10.3326/pse.44.2.2

Cited by 2 publications

(1 citation statement)

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“…Finally, the use of the lazy bank model as a grounding for the study stems from the need to explore the model for other unexplored purposes, as the literature on the lazy bank model has focused chiefly on the relationship between financial intermediation and economic growth, with limited attention paid to its impact on financial development [44,45]. Given the importance of financial development for economic growth, it is critical to comprehend how high public debt levels can affect the behaviour of banks and financial intermediaries and ultimately impact financial development.…”

Section: Introductionmentioning

confidence: 99%

Public Debt and It’s Impact on Bank Behaviour and Financial Efficiency: Ghana in Perspective

Osei-Amoako,

Aboagye-Debrah

2024

IJFBR

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This study explored the impact of public debt on bank behaviour and financial efficiency in Ghana amid rising global and national debt levels exacerbated by the COVID-19 pandemic’s economic repercussions. An exploratory research design employing a quantitative approach was used to analyze the perceptions of 201 banking professionals across Ghana. The study utilized cluster and purposive sampling techniques to ensure a representative sample. Data were collected on banks’ risk-averse behaviour, credit availability, interest rates, and investment decisions in relation to public debt levels, using survey instruments and regression analysis to quantify the impacts. The findings reveal significant concerns among banking professionals regarding the influence of high public debt on conservative lending practices, increased interest rates, reduced credit availability, and adverse effects on banks’ profitability and the financial system’s stability. Regression analysis confirmed a negative relationship between public debt and financial efficiency, indicating that rising public debt levels may hinder the sector’s operational effectiveness. These results underscore the critical need for strategic fiscal management to mitigate the risks associated with high public debt levels on financial stability and development. Policymakers and financial institutions are urged to consider measures that promote financial sector efficiency and sustainable debt levels, including fiscal consolidation strategies, diversification of investment portfolios, and enhancement of risk assessment models. This study contributes to the empirical discourse on the effects of public debt on financial development by providing insights specific to the Ghanaian context, which has been relatively underexplored.

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Section: Introductionmentioning

confidence: 99%