Measuring Financial Stability in Egypt Since the Implementation of Banking Reform Program (2004-2023)

Document Type : Original Article

Authors

1 Economics Department- Faculty of Economics and Political Sciences- Cairo University- Egypt

2 Insurance and Actuarial Sciences Department, Faculty of Commerce, Cairo University, Egypt

3 Financial Economics Department, School of Business Ahram Canadian University, Egypt

Abstract

This paper is significant as it addresses the absence of a financial stability index for Egypt, for the period starting from 2004, when banking sector reforms began. Its purpose is to develop an aggregate financial stability index (AFSI) for Egypt covering the years 2004 to 2023. The methodology involves two approaches: one based on equal sub-indices' weight and another on equal individual indicators' weight. Both approaches begin with data normalization, followed by the construction of the AFSI, which is then tested econometrically. The findings reveal increased financial sector stability in Egypt since 2020, although periods of instability were noted during the 2008 financial crisis, the 2011 revolution, and the COVID-19 pandemic. The econometric model confirmed the validity of the AFSI.

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