Investigating the symmetry and asymmetry of banking indicators on Iraq's economic growth: a quantile regression approach

Subject Areas : Financial Economics

kiumars shahbazi ¹ , Bssam Abdel Mohsen Hussein Al-Azzawi ²

1 - Professor of economics, Urmia University
2 - Urmia university

Received: 2023-10-14 Accepted : 2024-10-30

Keywords: Bank Stability, Economic Growth in Iraq, Bank Concentration, Quantile Regression,

Abstract :

Banking concentration and financial stability in a country can have different and asymmetric effects on economic growth at different levels. Therefore, this study uses the quantile regression (QR) model to examine the interactions between banking competition, banking stability, and economic growth in Iraq during the period of 2010:01-2020:12. First, Herfindahl-Hirschman, Lerner, three-firm concentration, five-firm concentration, and Z-SCORE indices were calculated, and then the QR model was estimated. The empirical results show that all concentration and stability indices of banks have negative and asymmetric effects on economic growth in different quartiles. Banking concentration has a greater negative impact on economic growth at lower levels. In addition, the coefficients of the banking stability index indicate that a stable financial environment for economic performance is more desirable when economic growth is at a lower level. However, the results of all estimates show that the negative effect of concentration is several times greater than the positive effect of banking stability on economic growth in all quartiles. Therefore, it is recommended to first reduce banking concentration by encouraging investors to create small and medium-sized banks to increase economic growth, and then impose restrictions on large banks to reduce banking risk and increase stability.