The impact of liquidity risk of banks on European and BRICS countries

  GDP = a + b* Risk + u Data: Europe + BRICS for years 2000 - 2015 What is the impact of risk on GDP?: Ans: b <- applies to all countries in your sample. (1) Separate the sample. GDP = a1 + b1* Risk + u1 using Europe GDP = a2 + b2* Risk + u2 using BRICS What is the impact of risk on GDP?: Ans: b1 if Europe, but b2 if BRICS (2) Including an interaction: GDP = a + c1 * Risk + c2 * Risk * 1(BRICS) + u 1(BRICS) dummy: 1 if BRICS, 0 if non-BRICS If BRICS … GDP = a + (c1 + c2) * Risk + u If Europe … GDP = a + c1 * Risk + u