Developing vulnerability index for MENA Region.

Résumé

Abstract

Financial crises like the subprime crisis in particular have brought attention to the possible threats to the stability of the financial system and the necessity of tighter oversight. However, there is still much to learn about financial stability, and its precise definition is elusive. This work's goal is to identify the financial systems' vulnerabilities in a number of MENA nations, including Morocco, Egypt, Palestine, Kuwait, Bahrain, Turkey, Lebanon, and the United Arab Emirates.

The detection of financial system fragility was achieved by developing three vulnerability indices : the BSFI vulnerability index proposed by Kibritcioglu (2003), the banking system vulnerability index used by the Swiss National Bank, and the third indicator proposed in this work by the Romanian National Bank (Albulescu, 2010), which differs from the previous two indices by incorporating several variables indicating changes in both the real and financial spheres.

The results from the calculations and analyses of the three indices proposed in our study led us to the following conclusions : Bahrain and Kuwait experienced financial turbulence during the 2008 crisis. Palestine and Lebanon experienced fragility during the period of 2011 and 2012, likely due to the political conflicts faced by both countries, though they were not spared from the extent of the 2008 financial crisis. Regarding the financial system in Turkey, the three indices detected financial turbulence during the monetary crisis that hit the Turkish economy in 2000-2001. The Egyptian financial system experienced a period of high financial stress during the international financial crisis of 2008. As for Morocco, the Moroccan banking and financial system encountered three periods of vulnerability detected by the vulnerability indices : the financial turbulences of 2000 and those of 2008 were detected by both the BFSI and ISF indices, as well as that of 2013, detected by the three indices ISF, BSFI, and IASF.

Keywords : Vulnerability Index ; Banking Fragility ; Financial Crises ; The MENA Region