Original scientific paper
https://doi.org/10.1080/1331677X.2020.1804970
Trust crisis in the financial sector and macroeconomic stability: a structural equation modelling approach
Maryna Brychko
orcid.org/0000-0002-9351-3280
Yuriy Bilan
Serhiy Lyeonov
Grzegorz Mentel
Abstract
Although the growing body of literature that recognises a destabilising role of the trust crisis in the macroeconomic stability, the
understanding of mediational pathways remains limited. The current paper fills the gap by contributing to the existing literature
by examining closely the mediating effect of the trust crisis in the
financial sector on the indicators of macroeconomic stability due
to the anticipated impact of the financial intermediation development and the monetary policy transmission mechanism, as well
as their combinatorial impact. A method of structural equation
modelling was used to analyse the input data. It has been empirically confirmed that exacerbation of the trust crisis in the financial sector without the use of regulatory measures is detrimental
to macroeconomic stability. The results of the mediation analysis
show that transmission channels of the monetary policy mechanism and developed financial sector mitigate the harmful effects of
deepening the trust crisis in the financial sector and lead to an
increase in macroeconomic stability indicators. From a practical
perspective, the findings revealed that interest, credit, and currency channels of the monetary policy transmission mechanism
could be used to cope with the erosion of the trust crisis in the
financial sector to macroeconomic stability.
Keywords
Trust crisis; macroeconomic stability; financial sector development; transmission mechanism
Hrčak ID:
301192
URI
Publication date:
31.12.2021.
Visits: 310 *