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This study aims to examine the interrelationship between financial stability and economic growth with a comprehensive analysis.

The panel Granger causality testing approach is carried out to the panels of the Fragile Five (F5) and the Group of Seven (G7) countries for the period 1998–2020. To capture the different aspects of financial stability the authors use eight different indicators.

The findings reveal some important implications: the relationship between financial stability and economic growth is sensitive to the financial stability indicators for both the F5 and G7 countries. The stability indicators related to the credit market contain much more causality relationship with economic growth than the indicators related to the stock market. Z-score and provisions to nonperforming loans (NPLs) are among the two variables with the highest causality relationship with economic growth. The least number of causality link is found for the Regulatory Capital Ratio and Stock Price Volatility in F5 countries and Credit Ratio, NPLs and Stock Price Volatility in G7 countries. Economic growth affects financial stability through credit market stability indicators and mostly for the F5 countries. No causal relationship is found for any of the financial stability indicators of Canada, the UK and the USA from economic growth to financial stability.

Since the linkages between financial stability and economic growth may vary due to country/group specific differences, apart from the previous studies, the authors select two different groups of countries in terms of financial stability and economic size.

The purpose of this paper is to provide a different context for considering issues of financial stability and instability, with reference to economic growth and price stability in particular.

This paper pursued an empirical exploration of six pillars of financial stability, based on a data set for the UK extending from 1985 (Q1) to 2008 (Q2), through the construction of a vector error correction model, including an impulse response function analysis.

The findings show a strong association between the financial and economic stability even in a non-crisis regime. This includes, for example, a strong association exists between the stock market and the real economy; exchange rate appreciation may not provide for long-term real economic growth; inflation does not contribute to real economic growth, both the sensitivity of the economy to yields and a significant lag in transitional effects from financial markets to the real sector; a positive role of credit creation within a non-crisis regime; exchange rate appreciation affects purchasing power; and potential points of linkage between sovereign debt activity and general price levels.

The findings should be considered in the context of a concept of the economy as fundamentally dynamic and subject to complex cumulative processes.

The findings indicate there is a role for state oversight and intervention within a non-crisis regime based on the complexity of possible interactions that may undermine financial and price stability, with consequences for their association with economic growth.

The study provides a new perspective for considering issues of financial stability and instability.

Revenue stability has been an important policy objective for state government administrators. This study explores whether the effect of revenue diversification on revenue volatility varies in terms of the instability of a state’s economic base. To empirically answer the question, an econometric model that explores a series of factors that could affect revenue stability is estimated using panel data on 47 state governments during the years 1986-2004. The findings indicate that revenue diversification reduces revenue instability for states that are economically stable. However, the revenue-stabilizing effect of diversification diminishes as the economic instability of a state increases. Although revenue diversification has been advocated as a desirable practice for sub-national governments, this study indicates that the benefits of revenue diversification are not always clear and its practice should be moderated by the conditions of a state’s economic base.

The purpose of this paper is to analyse the relationship between financial inclusion, banking stability and economic growth in sub-Saharan African countries given the interconnectedness between them. Globally, financial inclusion has gained recognition as a critical channel for promoting economic growth by bringing a large proportion of the unbanked population into the formal financial system. This cannot be achieved exclusive of the banking sector.

This paper focussed on 18 countries in sub-Saharan Africa. Data on financial inclusion and the economy were obtained from the World Bank, and bank soundness indicators data were also obtained from International Monetary Fund covering the 11-year period from 2008 through 2018. Panel system generalised method of moments is employed for the regression analysis because it has the capability to produce unbiased and consistent results even if there is endogeneity in the model.

The results show that economic growth drives banking stability and not vice versa; confirming a unidirectional causality from gross domestic product to banking stability. So, this study finds support for the demand-following hypothesis. The paper further observed that financial inclusion positively and significantly influences the stability of banks and economic growth. The study established that bank capital regulation negatively influences banking stability in sub-Saharan African countries.

This study does not capture the unique country-specific relationship.

The policy implication is that policymakers in sub-Saharan African countries should focus on growth-enhancing policies that improve the level of financial inclusion. The central banks in sub-Saharan African countries should take advantage of the positive effect of financial inclusion to develop regulatory frameworks and policies that make it attractive for banks to continue to expand their operations to the unbanked.

This is, as far as the authors know, the explanation of the interconnection of financial inclusion, banking stability and economic growth in sub-Saharan Africa.

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.

The purpose of this paper is to investigate on the social wellbeing aspects of human sustainability. Linked to this is the investigation on how economic stability and social wellbeing are interactively integrated together to establish the stability along with sustainability. What is the nature of the global financial architecture? Why has it defied formation? Have the underlying theory of financial economic theory, its variables and indicators, and axioms of man and society in their midst, denied the actualization of the intended institution? How can the global stability and well-being criterion be established from coordinated level of global socioeconomic consciousness?

A generalized evaluation model addressing the “as is” and the “as it ought to be” scenarios is formalized. An illustrative empirical example is provided to chart such a method of empirics using the episteme of unity of knowledge and its various ramifications.

Thus, there is a general perspective overarching the selection of theory, variables and their inter-causal consequences that the global financial architecture cannot answer. The institutional structure envisioned thereby is not representative of the lateral aggregation of membership in prevailing socioeconomic understanding. Instead, a complex yet unifying aggregation is carried out to receive its global acceptance? The episteme of unity of knowledge (Tawhid) in the Islamic perspective along with its methodological formalism and empirical and strategic implications for sustainable global financial stability is presented as the unique and universal alternative.

More empirical analysis can be carried out by extending the critical portfolio variables and collecting data on them as required.

The paper evaluates the roots of human deprivation in an uncertain global order as being based on a quaint way of understanding socio-scientific reality and applying human consciousness toward its reconstruction. The paper then proposes an alternative and applied perspective of the opposite methodological worldview premised on unity of knowledge and unity of the world-system. This epistemology is referred to as Tawhid, meaning the oneness of God represented by organic unity in the order of everything.

Within the world-system, complex as it is, abide the epistemological foundations of economic, financial and social thought. Thereby, the analytical extraction derived from the episteme of unity of knowledge (Tawhid) exemplifies the ethical reconstruction and its application in rigorous ways to attain sustained global financial and social stability.

This paper has suggested that under the prevailing paradigm of thought and its institutionalism the future of global financial stability is not sustainable as it has proved in the recent past. Yet there is a different epistemological way of rethinking the world-system in general in its interconnected dimensions and taking the specific example of the financial economy. Upon such new reconstruction, an entirely new methodological and strategic worldview can be established. This is the methodological worldview of unity of knowledge and its formalism.