Inflation Uncertainty, Macroprudential Regulations, and Bank Stability: Some Evidence From Emerging Economies

ABSTRACT This study examines the impact of inflation uncertainty on bank stability in the context of macroprudential regulations being increasingly adopted across countries. Utilizing a dataset of over 1600 banks in 33 emerging economies from 2000 to 2018, we find a negative relationship between inflation uncertainty and bank stability, indicating that higher inflation uncertainty significantly increases bank risk. However, our analysis reveals that tightened macroprudential regulations can effectively counteract this adverse influence, enhancing bank stability during periods of inflation uncertainty. These findings are consistent across a series of robustness tests, including alternative variable measurements, sensitivity analyses, and econometric approaches. Moreover, our results highlight the differential effectiveness of various macroprudential instruments. Specifically, regulations involving reserve requirements, asset‐based instruments, and capital buffers demonstrate more pronounced effects in mitigating the impact of inflation uncertainty on bank stability.

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Publication Details

Journal
International Review of Finance
Published
2025-11-24
DOI
https://doi.org/10.1111/irfi.70051
Primary Topic
Banking stability, regulation, efficiency
Type
article
Field-Weighted Citation Impact
0.00
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article

Inflation Uncertainty, Macroprudential Regulations, and Bank Stability: Some Evidence From Emerging Economies

Ji Wu, Yao Yao, Minghua Chen, Xueming Qin
International Review of Finance
Banking stability, regulation, efficiency
article

Inflation Uncertainty, Macroprudential Regulations, and Bank Stability: Some Evidence From Emerging Economies

Ji Wu, Yao Yao, Minghua Chen, Xueming Qin
article en

Abstract

ABSTRACT This study examines the impact of inflation uncertainty on bank stability in the context of macroprudential regulations being increasingly adopted across countries. Utilizing a dataset of over 1600 banks in 33 emerging economies from 2000 to 2018, we find a negative relationship between inflation uncertainty and bank stability, indicating that higher inflation uncertainty significantly increases bank risk. However, our analysis reveals that tightened macroprudential regulations can effectively counteract this adverse influence, enhancing bank stability during periods of inflation uncertainty. These findings are consistent across a series of robustness tests, including alternative variable measurements, sensitivity analyses, and econometric approaches. Moreover, our results highlight the differential effectiveness of various macroprudential instruments. Specifically, regulations involving reserve requirements, asset‐based instruments, and capital buffers demonstrate more pronounced effects in mitigating the impact of inflation uncertainty on bank stability.

International Review of FinanceVol. 25(4)
Southwestern University of Finance and Economics (CN), Chengdu University of Information Technology (CN), Institute of Economics (CN), Guizhou Institute of Technology (CN)
Openalex Percentile: Top 55%
Banking stability, regulation, efficiency
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Inflation Uncertainty, Macroprudential Regulations, and Bank Stability: Some Evidence From Emerging Economies — Ji Wu, Yao Yao, et al. · International Review of Finance (2025) | TGRS Research Map | TGRS