Country-wide protests and financial stability

This paper investigates the effect of country-wide protests on financial stability after controlling for inflation rate and the level of political stability. Country-wide protests may pressure a powerful government to listen and meet the demands of relatively less powerful groups, but country-wide protests can be destructive, especially when such protests lead to the destruction of the business assets of the clients of financial institutions, thereby making it difficult for them to meet their loan repayment and other obligations to financial institutions, and posing risk to the stability of the financial system. Financial stability and country-wide protests data were analysed for the UK. The empirical results show that bank non-performing loans are higher in country-wide protests years, implying that country-wide protests have a significant negative impact on financial stability through high non-performing loans in years where there are country-wide protests.