Trust crisis in the financial sector and macroeconomic stability: a structural equation modelling approach

Figures & data

Table 1. List of latent and observed variables in the hypothesised conceptual model.

Constructs (latent variable)	Items	Descriptions of items (observed indicator)
Trust crisis in the financial sector of the economy (TRUST.CRISIS. FIN.SEC.)	UAH/USD.RATE	The hryvnia to U.S. dollar exchange rate in the interbank foreign exchange market
	FAILED.BANKS	Number of Ukrainian banks, in respect of which a banking license has been revoked by the National Bank of Ukraine
	UNEMPL.RATE	Unemployment rate
Financial system development (FIN.SEC.DEVELOP.)	BANK/GDP	The ratio of bank assets to GDP
	NON-BANK. FIN.INST/GDP	The ratio of non-bank financial institutions assets to GDP
	SEC.TRAD/GDP	The ratio of securities trading to GDP
Transmission mechanisms of monetary policy (TRANS.MECHANISM)	INTEREST.RATE	The National Bank of Ukraine interest rate
	MONETARY.BASE	Money supply
	INTERNAT. RESERV	The volume of the National Bank of Ukraine gold and foreign currency reserves compared to the previous year
Macroeconomic stability (MACROECON. STABILITY)	GDP	Gross domestic product (annual)
	INDUST.PROD.	The volume of industrial products (goods, services) sold
	BOT	Ukraine trade balance

Source: Composed by the authors.

Figure 1. Proposed conceptual model of direct and mediating influence of trust crisis in the financial sector on macroeconomic stability. Source: Author’s elaboration.

Figure 2. Graphical representation of the mediation model of the study. Source: Author’s elaboration.

Figure 3. Output path diagrams. (a) The measurement model of the trust crisis in the financial sector. (b) The measurement model of the macroeconomic stability. (c) The measurement model of the monetary policy transmission mechanism. (d) The measurement model of the financial development. Source: Created by the authors based on their own calculation.

Table 2. Hypotheses testing summary.

Relationship			Effect (β)	SE	T-statistics	p-value
TRUST.CRISIS.FIN.SEC.	-25 →	TRANS.MECHANISM	0.103	0.054	1.932	0.053
TRUST.CRISIS.FIN.SEC.	-26 →	FIN.SEC.DEVELOP.	−0.480	0.128	−3.766	0.000
TRUST.CRISIS.FIN.SEC.	-27 →	MACROECON.STABILITY	−0.127	0.061	−2.079	0.038
TRANS.MECHANISM	-28 →	MACROECON.STABILITY	3.458	1.666	2.076	0.038
TRANS.MECHANISM	-29 →	FIN.SEC.DEVELOP.	4.013	2.013	1.993	0.046
FIN.SEC.DEVELOP.	-30 →	MACROECON.STABILITY	−0.496	0.110	−4.506	0.000

Source: Created by the authors based on their own calculation.

Figure 4. Graphical representation of the mediation model of the study with path coefficients. Source: Created by the authors based on their own calculation.

Table 3. Mediating effects and hypotheses testing summary.

Hypotheses	Mediators	Mediating effect (ab)	SEab	Sobel test (z test)	p-value	Results
H2	FIN.SEC.DEVELOP.	0.238	0.083	2.868	0.002	Significant
H3	TRANS.MECHANISM	0.356	0.218	1.633	0.051	Significant

Source: Created by the authors based on their own calculation.

Table 4. Goodness-of-fit statistics of the hypothesised conceptual model.

Fit index	Value
χ^2	1.236
Probability level	0.001
Maximum residual cosine	0.020
ICSF criterion	3.9E-007
ICS criterion	0.001
Steiger-Lind RMSEA	0.169
RMS standardised residual	0.258

Source: Created by the authors based on their own calculation.