TY - JOUR
T1 - How real estate bubbles affect the systemic risk of financial institutions in the United Arab Emirates
AU - Maghyereh, Aktham
N1 - Publisher Copyright:
© 2023 The Author
PY - 2024/1/15
Y1 - 2024/1/15
N2 - The paper addresses a crucial gap in the literature by examining the interplay between real estate price bubbles and systemic risk in the United Arab Emirates (UAE) from 2006 to 2022. The paper employs a three-step testing procedure: bubble detection using the bootstrapped GSADF test, measuring systemic risk using Delta-CoVaR and MES measures, and assessing the impact of real estate bubbles on bank risk through panel data regression. Utilizing a sample of 17 conventional banks operating in the UAE, the study demonstrates that the interplay between real estate price bubbles and systemic risk is influenced by the specific characteristics of banks. Higher levels of loan growth, leverage, and bank size heighten the systemic risk faced by banks during asset price bubbles. Interestingly, the results also indicate that banks with a greater degree of income diversification contribute less to systemic risk during periods characterized by real estate bubbles. The results from this study are useful for policymakers in designing and implementing regulations to stabilize and prevent the UAE's banking sector from being affected by real estate price bubbles.
AB - The paper addresses a crucial gap in the literature by examining the interplay between real estate price bubbles and systemic risk in the United Arab Emirates (UAE) from 2006 to 2022. The paper employs a three-step testing procedure: bubble detection using the bootstrapped GSADF test, measuring systemic risk using Delta-CoVaR and MES measures, and assessing the impact of real estate bubbles on bank risk through panel data regression. Utilizing a sample of 17 conventional banks operating in the UAE, the study demonstrates that the interplay between real estate price bubbles and systemic risk is influenced by the specific characteristics of banks. Higher levels of loan growth, leverage, and bank size heighten the systemic risk faced by banks during asset price bubbles. Interestingly, the results also indicate that banks with a greater degree of income diversification contribute less to systemic risk during periods characterized by real estate bubbles. The results from this study are useful for policymakers in designing and implementing regulations to stabilize and prevent the UAE's banking sector from being affected by real estate price bubbles.
KW - Delta CoVaR
KW - Generalized sup ADF approach
KW - MES
KW - Panel data regression
KW - Real estate bubbles
KW - Systemic risk
KW - UAE'S banking sector
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U2 - 10.1016/j.heliyon.2023.e23153
DO - 10.1016/j.heliyon.2023.e23153
M3 - Article
AN - SCOPUS:85179493148
SN - 2405-8440
VL - 10
JO - Heliyon
JF - Heliyon
IS - 1
M1 - e23153
ER -