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An analysis of bank liquidity in the Bahamas,2001-2012

Author

Listed:
  • Jordan, Alwyn
  • Branch, Sharon
  • McQuay, Andrea
  • Cooper, Yvonne
  • Smith, Latoya

Abstract

This paper provides an analysis of liquidity trends in The Bahamas over the 2001-June 2012 period. The study finds that the significant build-up in domestic liquidity observed over the last four years, also occurred in a number of countries, both developed and developing, and reflected several economic factors. Specific to The Bahamas, the accumulation in liquidity was driven by a slowdown in credit demand and the adoption of more cautious approaches to lending by the banks, due to heightened loan delinquencies. In addition, the contraction in output and the expansion in Government borrowing—particularly from external sources—have all played a major role in the significant augmentation in both excess reserves and excess liquid assets in the domestic banking system. The paper showed that the build-up in liquidity is likely to persist in the near-term and conditions should moderate gradually, as the economy recovers. Moreover, the Central Bank’s use of securities such as Treasury Bills may be effective in producing changes in liquidity over the short-term.

Suggested Citation

  • Jordan, Alwyn & Branch, Sharon & McQuay, Andrea & Cooper, Yvonne & Smith, Latoya, 2012. "An analysis of bank liquidity in the Bahamas,2001-2012," MPRA Paper 51872, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:51872
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    File URL: https://mpra.ub.uni-muenchen.de/51872/1/MPRA_paper_51872.pdf
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    References listed on IDEAS

    as
    1. Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander W., 2004. "The credit crunch in East Asia: what can bank excess liquid assets tell us?," Journal of International Money and Finance, Elsevier, vol. 23(1), pages 27-49, February.
    2. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    3. Winston R. Moore, 2007. "Forecasting domestic liquidity during a crisis: what works best?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 26(6), pages 445-455.
    4. Tarron Khemraj, 2010. "What does excess bank liquidity say about the loan market in Less Developed Countries?," Oxford Economic Papers, Oxford University Press, vol. 62(1), pages 86-113, January.
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    Cited by:

    1. Primus, Keyra, 2017. "Excess reserves, monetary policy and financial volatility," Journal of Banking & Finance, Elsevier, vol. 74(C), pages 153-168.
    2. Primus, Keyra, 2018. "The effectiveness of monetary policy in small open economies," Journal of Policy Modeling, Elsevier, vol. 40(5), pages 903-933.

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    More about this item

    Keywords

    Excess bank liquidity; Bahamas; Caribbean economies;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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