-
Add to calendar
Bank of Finland, Rauhankatu 19 B, Helsinki
Denis Davydov (University of Vaasa): Cyclicality of bank liquidity creation
Co-authors: Zuzana Fungáčová and
Laurent Weill
Abstract
This paper investigates the cyclicality of bank liquidity creation. Since liquidity creation is a major function of banks in the economy, banks may contribute to amplify business cycle fluctuations through their liquidity creation behavior. Using Berger and Bouwman (2009)'s methodology to compute liquidity creation measures, we analyze the relation between GDP growth and liquidity creation of Russian banks covering the period between 2004 and 2015. Quarterly detailed data on a very large sample of banks and the coexistence of state-owned, domestic private, and foreign banks, makes Russia a country of prime interest to analyze cyclicality of liquidity creation for all banks and by ownership type. We find that liquidity creation of banks is procyclical and show that state-owned banks and foreign-owned banks do not have a more or less procyclical liquidity creation behavior than domestic private banks. Moreover we find that GDP growth has a higher impact on bank liquidity creation than on bank lending. Hence we support the view that liquidity creation behavior of banks can contribute to amplify business cycle fluctuations, while ownership of banks does not influence this channel.
BOFIT seminars are held on Tuesdays at 10.30–11.30 in Rauhankatu 19, 3rd floor big meeting room (unless indicated otherwise). Seminars are held in English.
BOFIT seminars are open to all economists interested in the subject areas covered. Please register in advance at bofit(at)bof.fi or by phone +358 10 831 2268 by noon of the preceding day. Visitors will be escorted from Rauhankatu 19 B (Kirjasto/Library) entrance to the seminar room 10 minutes before the seminar.