BANKING SYSTEM OF UKRAINE UNDER THE CONDITIONS OF PANDEMIC AND WAR: SIMULTANEOUS ECONOMETRIC MODEL
Abstract
The high-quality work of the banking sector creates opportunities for economic development. However, significant turbulence, first due to the COVID-19 pandemic and later due to the full-scale war, affected the state of the banking system of Ukraine. With the beginning of russia's full-scale war in Ukraine, the banking system faced serious difficulties. However, it passed the most difficult stages with dignity and continued to work without failure. We propose the simultaneous model of the banking sector of Ukraine based on quarterly statistical data for 2016-2022. The aggregate assets of banks, the capital and reserves of banks, and the expenses of banks of Ukraine were used as the endogenous variables. Macroeconomic and financial indicators were selected as exogenous variables: bank income, bank loans, state budget expenditures, retail turnover, and export of goods and services. Dependencies between variables are described by three equations. According to the first equation, banks' assets are affected by capital, reserves, income, bank loans, and government budget expenditures. The second equation describes the dependence of banks' capital and reserves on aggregate assets and expenditures of banks, as well as on macroeconomic indicators of retail turnover, export, and state budget expenditures. The third equation examines the impact of bank assets, capital, income, and loans, as well as state budget expenditures, on bank expenditures. High values of R-squared and statistically significant parameters were obtained for all equations. It was found that the assets, capital, and reserves of banks are depended on the volume of retail trade, and the expenses of banks are depended on the incomes of banks, which is quite logical. A close relationship between indicators of banking activity and macroeconomic indicators was also revealed. Taking into account the modeling results, it can be concluded that the implementation of the simultaneous model of the banking system of Ukraine is an essential tool for assessing the relationship between macroeconomic factors and quantitative characteristics of banking activity and their impact in order to ensure the financial stability of the banking system.
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