ESTIMATION OF FACTORS AFFECTING FINANCIAL STABILITY FOR THE REPUBLIC OF ARMENIA

Abstract

Financial stability is one of the core components of sustainable development. This paper analyzes key factors affecting financial stability by using a Financial Soundness Index as a proxy. The main destination of the paper is to find factors that are not obvious at first. For this exercise we used OLS method. Results show that increases in the interest rate spread, monetary base and gross international reserves have a positive impact on stability, whereas higher government revenues may reduce it. The results can be implemented in policy decision making proces.