IDEAS home Printed from https://ideas.repec.org/a/cbk/journl/v11y2022i2p55-76.html
   My bibliography  Save this article

Bank-Specific and Macroeconomic Determinants of Bank Liquidity Creation: Evidence from MENA Countries

Author

Listed:
  • Anas Alaoui Mdaghri

    (EMAA Business School, Agadir, Morocco and National School of Business and Management (ENCG), Ibn Zohr University, Agadir, Morocco)

  • Lahsen Oubdi

    (National School of Business and Management (ENCG), Ibn Zohr University, Agadir, Morocco)

Abstract

This study measures liquidity creation within a sample of 153 banks operating in 12 Middle Eastern and North African (MENA) countries from 2008 to 2017. We found that these banks created a total of $461.32 billion in liquidity in 2017, approximately 1.51 times the total liquidity created in 2008, mainly driven by commercial banks in Gulf Cooperation Council (GCC) countries. We also conducted an econometric analysis to investigate the internal and external factors affecting bank liquidity creation, applying a Fixed Effects model and the new Method of Moments Quantile Regression (MMQR). The results show that, among bank-specific factors, bank liquidity creation in MENA countries is related to capital, size, bank risk, deposits and profitability whilst market concentration does not appear to play a significant role. Regarding macroeconomic factors, inflation, unemployment, savings and monetary policy explain the variations in bank liquidity creation.

Suggested Citation

  • Anas Alaoui Mdaghri & Lahsen Oubdi, 2022. "Bank-Specific and Macroeconomic Determinants of Bank Liquidity Creation: Evidence from MENA Countries," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 11(2), pages 55-76.
    • Handle: RePEc:cbk:journl:v:11:y:2022:i:2:p:55-76
    as

    Download full text from publisher

    File URL: http://www.cbcg.me/repec/cbk/journl/vol11no2-3.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicola Cetorelli & Philip E. Strahan, 2006. "Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets," Journal of Finance, American Finance Association, vol. 61(1), pages 437-461, February.
    2. Bryant, John, 1980. "A model of reserves, bank runs, and deposit insurance," Journal of Banking & Finance, Elsevier, vol. 4(4), pages 335-344, December.
    3. Berger, Allen N. & Black, Lamont K., 2011. "Bank size, lending technologies, and small business finance," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 724-735, March.
    4. Allen N. Berger & Christa H. S. Bouwman, 2009. "Bank Liquidity Creation," The Review of Financial Studies, Society for Financial Studies, vol. 22(9), pages 3779-3837, September.
    5. Douglas W. Diamond & Raghuram G. Rajan, 2000. "A Theory of Bank Capital," Journal of Finance, American Finance Association, vol. 55(6), pages 2431-2465, December.
    6. Vesna Karadžić & Nikola Đalović, 2021. "Profitability Determinants of Big European Banks," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(2), pages 39-56.
    7. Repullo, Rafael, 2004. "Capital requirements, market power, and risk-taking in banking," Journal of Financial Intermediation, Elsevier, vol. 13(2), pages 156-182, April.
    8. Roman Horváth & Jakub Seidler & Laurent Weill, 2014. "Bank Capital and Liquidity Creation: Granger-Causality Evidence," Journal of Financial Services Research, Springer;Western Finance Association, vol. 45(3), pages 341-361, June.
    9. Zheng, Chen & (Wai Kong) Cheung, Adrian & Cronje, Tom, 2019. "The moderating role of capital on the relationship between bank liquidity creation and failure risk," Journal of Banking & Finance, Elsevier, vol. 108(C).
    10. Xiaoqing Maggie Fu & Yongjia Rebecca Lin & Philip Molyneux, 2015. "Bank Liquidity Creation and Regulatory Capital in Asia Pacific," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Bank Competition, Efficiency and Liquidity Creation in Asia Pacific, chapter 5, pages 96-124, Palgrave Macmillan.
    11. Faisal Abbas & Zahid Irshad Younas, 2021. "How Do Bank Capital and Capital Buffer Affect Risk: Empirical Evidence from Large US Commercial Banks," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(2), pages 109-131.
    12. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, January.
    13. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    14. Gorton, Gary & Winton, Andrew, 2003. "Financial intermediation," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 8, pages 431-552, Elsevier.
    15. Jiang, Liangliang & Levine, Ross & Lin, Chen, 2019. "Competition and Bank Liquidity Creation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(2), pages 513-538, April.
    16. Coval, Joshua D. & Thakor, Anjan V., 2005. "Financial intermediation as a beliefs-bridge between optimists and pessimists," Journal of Financial Economics, Elsevier, vol. 75(3), pages 535-569, March.
    17. Anil K. Kashyap & Raghuram Rajan & Jeremy C. Stein, 2002. "Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit‐taking," Journal of Finance, American Finance Association, vol. 57(1), pages 33-73, February.
    18. Douglas W. Diamond & Raghuram G. Rajan, 2001. "Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 287-327, April.
    19. Distinguin, Isabelle & Roulet, Caroline & Tarazi, Amine, 2013. "Bank regulatory capital and liquidity: Evidence from US and European publicly traded banks," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3295-3317.
    20. Bengt Holmstrom & Jean Tirole, 1997. "Financial Intermediation, Loanable Funds, and The Real Sector," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 663-691.
    21. Deep, Akash & Schaefer, Guido, 2004. "Are Banks Liquidity Transformers?," Working Paper Series rwp04-022, Harvard University, John F. Kennedy School of Government.
    22. Berger, Allen N. & Sedunov, John, 2017. "Bank liquidity creation and real economic output," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 1-19.
    23. Horvath, Roman & Seidler, Jakub & Weill, Laurent, 2016. "How bank competition influences liquidity creation," Economic Modelling, Elsevier, vol. 52(PA), pages 155-161.
    24. Lei, Adrian C.H. & Song, Zhuoyun, 2013. "Liquidity creation and bank capital structure in China," Global Finance Journal, Elsevier, vol. 24(3), pages 188-202.
    25. Chatterjee, Ujjal K., 2018. "Bank liquidity creation and recessions," Journal of Banking & Finance, Elsevier, vol. 90(C), pages 64-75.
    26. Machado, José A.F. & Santos Silva, J.M.C., 2019. "Quantiles via moments," Journal of Econometrics, Elsevier, vol. 213(1), pages 145-173.
    27. Berger, Allen N. & Bouwman, Christa H.S. & Kick, Thomas & Schaeck, Klaus, 2016. "Bank liquidity creation following regulatory interventions and capital support," Journal of Financial Intermediation, Elsevier, vol. 26(C), pages 115-141.
    28. Tafirei Mashamba, 2022. "Liquidity Dynamics of Banks in Emerging Market Economies," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 11(1), pages 179-206.
    29. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    30. Toh, Moau Yong, 2019. "Effects of bank capital on liquidity creation and business diversification: Evidence from Malaysia," Journal of Asian Economics, Elsevier, vol. 61(C), pages 1-19.
    31. Berger, Allen N. & Bouwman, Christa H.S., 2017. "Bank liquidity creation, monetary policy, and financial crises," Journal of Financial Stability, Elsevier, vol. 30(C), pages 139-155.
    32. Muhammad Umar & Gang Sun, 2016. "Determinants of different types of bank liquidity: evidence from BRICS countries," China Finance Review International, Emerald Group Publishing Limited, vol. 6(4), pages 380-403, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xuanling MA & Meng JI, 2023. "Analysis on Liquidity Risk Management of Monetary and Financial Services based on the Goal of Financial Stability," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 72-91, June.
    2. Gupta, Juhi & Kashiramka, Smita & Ly, Kim Cuong & Pham, Ha, 2023. "The interrelationship between bank capital and liquidity creation: A non-linear perspective from the Asia-Pacific region," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 793-820.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gupta, Juhi & Kashiramka, Smita & Ly, Kim Cuong & Pham, Ha, 2023. "The interrelationship between bank capital and liquidity creation: A non-linear perspective from the Asia-Pacific region," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 793-820.
    2. Berger, Allen N. & Sedunov, John, 2017. "Bank liquidity creation and real economic output," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 1-19.
    3. Pana, Elisabeta, 2023. "A bibliometric review of liquidity creation," Research in International Business and Finance, Elsevier, vol. 64(C).
    4. Seba Mohanty & Jitendra Mahakud, 2021. "Causal Nexus Between Liquidity Creation and Bank Capital Ratio: Evidence from India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 15(2), pages 205-237, May.
    5. Gupta, Juhi & Kashiramka, Smita, 2020. "Financial stability of banks in India: Does liquidity creation matter?," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    6. Gao, Bo & Li, Junjiang & Shi, Benye & Wang, Xiaojuan, 2020. "Internal conflict and Bank liquidity creation: Evidence from the belt and Road initiative," Research in International Business and Finance, Elsevier, vol. 53(C).
    7. Barbara Casu & Filippo Pietro & Antonio Trujillo-Ponce, 2019. "Liquidity Creation and Bank Capital," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(3), pages 307-340, December.
    8. Huang, Shu-Chun & Chen, Wei-Da & Chen, Yehning, 2018. "Bank liquidity creation and CEO optimism," Journal of Financial Intermediation, Elsevier, vol. 36(C), pages 101-117.
    9. Nguyen, Thach Vu Hong & Ahmed, Shamim & Chevapatrakul, Thanaset & Onali, Enrico, 2020. "Do stress tests affect bank liquidity creation?," Journal of Corporate Finance, Elsevier, vol. 64(C).
    10. Boubakri, Narjess & Cao, Zhongyu & El Ghoul, Sadok & Guedhami, Omrane & Li, Xinming, 2023. "National culture and bank liquidity creation," Journal of Financial Stability, Elsevier, vol. 64(C).
    11. Duan, Ying & Niu, Jijun, 2020. "Liquidity creation and bank profitability," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    12. Chen, Ting-Hsuan & Shen, Chung-Hua & Wu, Meng-Wen & Huang, Kuo-Jui, 2021. "Effect of shadow banking on the relation between capital and liquidity creation," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 166-184.
    13. Kapoor, Supriya & Peia, Oana, 2021. "The impact of quantitative easing on liquidity creation," Journal of Banking & Finance, Elsevier, vol. 122(C).
    14. Ahmad Sahyouni & Man Wang, 2022. "Bank capital and liquidity creation: evidence from Islamic and conventional MENA banks," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 12(3), pages 291-311.
    15. Toh, Moau Yong, 2019. "Effects of bank capital on liquidity creation and business diversification: Evidence from Malaysia," Journal of Asian Economics, Elsevier, vol. 61(C), pages 1-19.
    16. Davydov, Denis & Vähämaa, Sami & Yasar, Sara, 2021. "Bank liquidity creation and systemic risk," Journal of Banking & Finance, Elsevier, vol. 123(C).
    17. Tran, Dung Viet, 2020. "Bank business models and liquidity creation," Research in International Business and Finance, Elsevier, vol. 53(C).
    18. Zheng, Chen & (Wai Kong) Cheung, Adrian & Cronje, Tom, 2019. "The moderating role of capital on the relationship between bank liquidity creation and failure risk," Journal of Banking & Finance, Elsevier, vol. 108(C).
    19. Jalali Farahani , Alireza & Sargolzaee , Mostafa & Dehghan Nayeri , Leila & Ghaffari Nejad , Amir Hossein, 2020. "Effects of Capital Raising on Liquidity Creation and Credit in the Banking System of Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 15(1), pages 101-121, January.
    20. Dang, Van Dan & Huynh, Japan, 2022. "Bank funding, market power, and the bank liquidity creation channel of monetary policy," Research in International Business and Finance, Elsevier, vol. 59(C).

    More about this item

    Keywords

    bank liquidity creation; bank-specific and macroeconomic determinants; Method of Moments Quantile Regression; MENA region.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbk:journl:v:11:y:2022:i:2:p:55-76. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cbmgvme.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.