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Can money supply endogeneity influence bank stock returns? A case study of South Asian economies

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Abstract

This study tests the Post-Keynesian theory regarding bank stock returns and money supply endogeneity in the context of South Asian countries. This study uses panel data set from different sources over twenty-eight (28) years. The research uses different econometric techniques before switching to the generalized method of moments (GMM). The empirical results indicate a significant positive effect of net interest rate margins on bank loans in South Asian countries, whereas a positive relationship exists between foreign to local interest rates and the money supply. The findings depict that positive associations exist between inflation and money supply of banks, and between the money supply and bank stock returns. More specifically, the GMM results show that the money supply has positively affected the stock prices of banks suggesting strong policies for the stakeholders of these economies for the sake of economic growth and sustainable development.

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Authors and Affiliations

  1. School of Accountancy, Anhui University of Finance and Economics, Bengbu, China

    Lingcai Liu

  2. National Skills University, Islamabad, Pakistan

    Taqadus Bashir

  3. Abu Dhabi University, Abu Dhabi, United Arab Emirates

    Alaa Amin Abdalla

  4. American University in the Emirates, Dubai, United Arab Emirates

    Asma Salman

  5. Universidad Andina del Cusco, Cuzco, Peru

    Carlos Samuel Ramos-meza

  6. Teerthanker Mahaveer Institute of Management and Technology, Moradabad, Uttar Pradesh, India

    Vipin Jain

  7. University of Lahore, Lahore, Pakistan

    Malik Shahzad Shabbir

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Liu, L., Bashir, T., Abdalla, A.A. et al. Can money supply endogeneity influence bank stock returns? A case study of South Asian economies. Environ Dev Sustain 26, 2775–2787 (2024). https://doi.org/10.1007/s10668-022-02867-6

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