Construction of a Stress Index for the Tunisian Banking Sector

Abstract

This article aims to develop an annual stress index for the Tunisian banking sector. There is as yet no such aggregate index for Tunisia; it thus makes it possible to complete the set of indicators put in place by the Bank of Tunisia and the IMF as part of the financial sector assessment program to understand the strength of this sector. The article first explains the method used. After having presented various measurement techniques, we choose a stress index constructed from five variables of the balance sheet over 22 years from 1998 to 2020. The banking stress index increases over the period 2011-2020, reflecting both the consequences of the revolution on the Tunisian economy as well as the endless aftermath of the current COVID-19 epidemic. The econometric results confirm the index's sensitivity to variations in the main macroeconomic indicators

Keywords: Bank, Banking stress index, Tunisia

JEL Classification: G01