MODELING THE LEVEL OF A COUNTRY'S FINANCIAL STABILITY: AN ECONOMIC AND MATHEMATICAL APPROACH

Abstract

The global nature of recent financial crises clearly demonstrates that while the integration of financial markets offers numerous benefits, it can also pose significant risks, often resulting in substantial losses in the real economy. In this context, analyzing the transformation of financial markets is essential for identifying threats, as it is characterized by persistent volatility and is vulnerable to crisis phenomena. It is equally important for developing protective mechanisms against adverse developments that do not hinder the dynamics of economic growth. This issue becomes particularly relevant in the context of the emerging digital economy and society, where the implementation of innovative life-support models creates new channels for the transmission of systemic risks and increases the structural heterogeneity of national financial systems, thereby necessitating a corresponding enhancement of the economic and mathematical tools used to model them. The proposed methodology employs VAR models to compare financial stability parameters. This approach reveals no universal dependencies between banking system safety indicators and key macroeconomic variables, such as GDP dynamics, interest rates, the real exchange rate, and monetary emission, across individual countries. An analysis of data from Eastern Europe, the former Soviet Union, Latin America, and Southern Europe demonstrates that: a) higher capitalization requirements generally neither increase interest rates nor negatively affect GDP dynamics; b) while a rise in non-performing loans adversely affects GDP dynamics, higher profitability of bank assets and capital has the opposite effect; and c) the short- and long-term liquidity of the banking system has virtually no impact on the macroeconomic indicators of Southern European countries, whereas these functional dependencies vary considerably across other regions. Overall, the results demonstrate the absence of universal dependencies between specific financial stability parameters and macroeconomic indicators. This implies that prioritizing measures to enhance the anti-crisis resilience of individual countries must consider the specific characteristics of their structural frameworks.