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Haiti’s Banking System Stability: A Statistical Analysis

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A recent study conducted by researchers has shed light on the stability of Haiti’s banking system, revealing a complex relationship between economic and institutional factors. Using data from 1996 to 2017, the team analyzed various indicators, including GDP growth rate, exchange rate, political stability index, regulatory quality index, bank lending-deposit interest rate spread, investment freedom index, and property rights index.

Descriptive Statistics

The study began by examining descriptive statistics for the dependent variable (Z-score) and explanatory variables. The results showed that on average, Haiti’s Z-score is 10.1759, with a risk of 2.4574. This value is lower than the Z-score of neighboring Dominican Republic’s banking system, which averaged 25.2404 over the same period.

Summary Statistics

  • Average Z-score: 10.1759
  • Risk: 2.4574
  • GDP growth rate: 1.62% (average), 2.27% (standard deviation)
  • Exchange rate: 36.7923 HTG/USD (average), 13.6725 HTG/USD (standard deviation)

Pair-Wise Correlations

The study’s pairwise correlation matrix revealed that banking stability (Z-score) is positively correlated with GDP growth rate and exchange rate. It also showed positive correlations between Haitian banking stability and property rights index and investment freedom index. However, the analysis found a negative correlation between banking stability and bank lending-deposit interest rate spread.

Correlation Matrix

  • Z-score vs. GDP growth rate: 0.5426 (positive)
  • Z-score vs. Exchange rate: 0.4619 (positive)
  • Z-score vs. Property rights index: 0.4357 (positive)
  • Z-score vs. Investment freedom index: 0.4121 (positive)
  • Z-score vs. Bank lending-deposit interest rate spread: -0.3578 (negative)

OLS Regression Analysis

The researchers conducted an OLS regression analysis to examine the relationship between macroeconomic factors (GDP growth rate and exchange rate) and banking stability. The results showed that both GDP growth rate and exchange rate are highly statistically significant, with p-values less than 0.05.

Results

  • For every unit increase in GDP growth rate, Haitian banking stability increases by 0.335.
  • For every unit increase in the exchange rate (depreciation of local currency), banking stability increases by 0.140.
  • Overall model is significant, with a p-value less than 2.2e−16.

Conclusion

The study’s findings suggest that GDP growth rate and exchange rate have a positive impact on Haitian banking stability. These results are consistent with previous research, which highlights the importance of macroeconomic environment in reducing non-performing loans and enhancing credit quality. The study’s conclusions may have implications for policymakers seeking to stabilize Haiti’s banking system.

Data Analysis Using R Software

The study used R software to analyze the data, providing a robust statistical framework for understanding the relationships between economic and institutional factors and Haitian banking stability.

References

  • Karim, Abduh, & Alhabshi (2015)
  • Kozarić, & Dželihodžić (2020)