Study of the Impact of Macroeconomic Factors on the Capital Adequacy Ratio
DOI:
https://doi.org/10.54691/mf1m2p93Keywords:
Capital Adequacy Ratio, Macroeconomic Factors, Panel Data, Developed Economies, Emerging Economie.Abstract
The main aim is to find the influence of the three macroeconomic factors, including inflation, interest, broad money, and real growth rate, on the capital adequacy of the countries. Firstly, the Hausman test found the best fit analysis. The data was collected from Fred's database. A comparative study was conducted, and it found that the developed nations' capital adequacy level significantly influences macroeconomic factors. The overall data analysis of all the countries found that interest rates, inflation, broad money, and real growth determine the capital adequacy ratio. This study examines the influence of four macroeconomic factors-inflation ,interest rate,broad money, and real growth rate investigates the influence of four macroeconomic factor -inflation, interest rate, broad money, and real growth rate -on the capital adequacy ratio (CAR) of six countries from 1998 to 2019. Using panel data regression with fixed effects selected via the Hausman test, the analysis compares developed nations (United States, United Kingdom, European Union) and emerging nations (China, Malaysia, Indonesia). The findings reveal that macroeconomic factors significantly determine the capital adequacy ratio in the full sample. However, a comparative analysis shows that developed nations’ CAR is significantly influenced by inflation, interest rate, and broad money, while emerging nations’ CAR is only affected by the real growth rate. These results highlight the differeing sensitivity of capital regulation to macroeconomic conditions across development stages
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