Impact of Government Policies on Financial Resilience During Economic Crises in Pakistan and Bangladesh

Abstract

This research examines financial Resilience with reference to Pakistan and Bangladesh in the period between 2000 and 2020. The cross-sectional fixed-effect panel regression analysis assesses the effect of unemployment, government initiatives (indicated by the central bank assets to GDP ratio), trade openness, FDI attraction, and bank capital adequacy. Further, the findings reveal that Bank capital adequacy lead among the predictor variables to the level of financial resilience pointing to the need for better regulatory reforms in the banking sector. On the other hand, the variables of unemployment and trade openness achieved less meaningful ROE as they are affected by structural changes in the individual countries. The insights produced here have implications for policymakers to improve the state of financial development in emergent economies. Future research could apply this framework to other regions or add other institutional characteristics to further elucidate financial resilience determinants.