The Impact of Monetary Shocks on Financial Stability on Selected Economies .

Thesis submitted to the Council of the College of Administration and  Economics – University of Karbala

It is part of the requirements for obtining a master’s degree in economic sciences

submitted by the student

Marwa Ali Nima Abdel-Asadi

Supervised By

  Asst Prof .  Dr.

Khudhair Abbas Hussein Alwaely

Most economies in the world, whether developed or developing, are exposed to monetary shocks on a semi-periodic basis and may leave undesirable effects on their financial and economic stability. Therefore, central banks seek to use their tools to get rid of these unwanted monetary shocks and the impact they leave on the financial system by strengthening the liquidity of the banking system to face any crisis and shock, whether it is a monetary, financial or economic shock.

The research stems from the hypothesis that negative monetary shocks have an impact on financial stability indicators and lead to its destabilization, in contrast to positive monetary shocks.

In order to verify this hypothesis, it is possible to use the measurement and analysis of the relationship between monetary shocks and financial stability in the selected countries and present the results of the standard models used in the research, which are represented by the VAR autoregressive model, which relies on testing the stability of time series (unit root), as well as the use of response functions. The pulse and the analysis of the components of variance that measure the impact of monetary shocks on financial stability. The research has reached a number of conclusions, the most important of which is that negative monetary shocks lead to restricting the work of the banking system and its hedge in granting credit, especially since negative monetary shocks lead to higher interest rates, which in turn leads to This led to the reluctance of investors to invest and created a state of economic chaos, which led to the simultaneous phenomenon of unemployment and inflation. The study recommends that central banks should seek to organize and monitor the performance of the banking system in order to reduce the impact of crises and shocks to which the banking system is exposed, by retaining a larger percentage of the funds kept by banks to face crises and emergencies, i.e. work to strengthen liquidity The banking system to avoid the deterioration of the financial system.

The Impact of Monetary Shocks on Financial Stability on Selected Economies

Thesis submitted to the Council of the College of Administration and                                        Economics – University of Karbala

It is part of the requirements for obtining a master’s degree in economic sciences

submitted by the student

Marwa Ali Nima Abdel-Asadi

Supervised By

  Asst Prof .  Dr.

Khudhair Abbas Hussein Alwaely

Most economies in the world, whether developed or developing, are exposed to monetary shocks on a semi-periodic basis and may leave undesirable effects on their financial and economic stability. Therefore, central banks seek to use their tools to get rid of these unwanted monetary shocks and the impact they leave on the financial system by strengthening the liquidity of the banking system to face any crisis and shock, whether it is a monetary, financial or economic shock.

The research stems from the hypothesis that negative monetary shocks have an impact on financial stability indicators and lead to its destabilization, in contrast to positive monetary shocks.

In order to verify this hypothesis, it is possible to use the measurement and analysis of the relationship between monetary shocks and financial stability in the selected countries and present the results of the standard models used in the research, which are represented by the VAR autoregressive model, which relies on testing the stability of time series (unit root), as well as the use of response functions. The pulse and the analysis of the components of variance that measure the impact of monetary shocks on financial stability. The research has reached a number of conclusions, the most important of which is that negative monetary shocks lead to restricting the work of the banking system and its hedge in granting credit, especially since negative monetary shocks lead to higher interest rates, which in turn leads to This led to the reluctance of investors to invest and created a state of economic chaos, which led to the simultaneous phenomenon of unemployment and inflation. The study recommends that central banks should seek to organize and monitor the performance of the banking system in order to reduce the impact of crises and shocks to which the banking system is exposed, by retaining a larger percentage of the funds kept by banks to face crises and emergencies, i.e. work to strengthen liquidity The banking system to avoid the deterioration of the financial system.