Mohammadali Kafaie; Mahboubeh Rahzaani
Abstract
The stateof bankrupcy and losses incurred by many banks in recent global financial crisis has doubled the importance of paying attention to the liquidity of banks as an indicator of health and stability of banking systems. In addition, due to dependence of banking system's performance on economic variables ...
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The stateof bankrupcy and losses incurred by many banks in recent global financial crisis has doubled the importance of paying attention to the liquidity of banks as an indicator of health and stability of banking systems. In addition, due to dependence of banking system's performance on economic variables at the macro level, with a consideration on intermediatory function of banks and role of macroeconomic instability in creating financial system instability, which influences banks' performance and activity, studying the stability and health of the banking system has become more important. Therefore the purpose of this study is to evaluate the impact of macroeconomic fluctuations on liquidity risk of bank. Using GARCH and EGARCH models, panel data, the effects of macroeconomic fluctuations on liquidity risk of banks in Iran is studied by using quarterly data of 14 largest banks of the country during 2006:2-2014:1. The results show that fluctuations in GDP, inflation, exchange rate and stock price index as most important macroeconomic variables have significant effects on liquidity risk of banks. Therefore, higher fluctuations in Iranian economy can result in shortages of liquidity in banks and changing composition of bank deposits and eventually exposing banks to higher liquidity risks.
azam ahmadyan; mehran kyanvand
Volume 15, Issue 59 , January 2016, , Pages 57-94
Abstract
Bank liquidity increases the ability of banks in case of suddenly decreasing deposits and for the purpose of credit financing. The central bank as a policy-maker institution can play an important role in preventing a liquidity crisis, when the banks' liquidity risks have increased. One of the most important ...
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Bank liquidity increases the ability of banks in case of suddenly decreasing deposits and for the purpose of credit financing. The central bank as a policy-maker institution can play an important role in preventing a liquidity crisis, when the banks' liquidity risks have increased. One of the most important tools for central bank is liquidity injection in the banking system in a liquidity crisis. Since effectiveness of liquidity injection in reducing the probability of liquidity risk depends on the health status of the banks, in this paper we study the effect of liquidity injection on reducing liquidity crisis with a consideration for soundness of banking activities, using a a panel-logit model and balance sheet and income statement data for the period of 2006-2013. Results show that liquidity injection reduces liquidity risk and if one bank is more stable than other banks, it will have lower liquidity risk than others.