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Determinants of Excess Liquidity in Tanzanian

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Listed author(s):
  • Jehovaness Aikaeli

    ()

    (University of Dar es Salaam, Tanzania)

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    Abstract

    Among the current concerns in Tanzania is that banks are awash with liquidity notwithstanding the private sector high demand for credit. Excess liquidity constrains banks’ productivity/efficiency; and on the other hand, strangles the share of credit allocated to the private sector, thereafter upsetting economic growth. To determine the causes of excess liquidity, autoregressive distributed lag model is employed. The findings suggest that high cost of funds, credit risks, volatility of deposit holders’ cash preference, inter alia, perpetuated accumulation of excess liquidity in commercial banks. Important policy implications on price stability, risks minimization, proper supervision and optimal liquidity management are highlighted.

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    Article provided by Africagrowth Institute in its journal African Finance Journal.

    Volume (Year): 13 (2011)
    Issue (Month): 1 ()
    Pages: 47-63

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    Handle: RePEc:afj:journl:v:13:y:2011:i:1:p:47-63
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    Keywords: Excess liquidity; Commercial banks; Reserves; Deposits;

    Find related papers by JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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    Cited by:

    1. Simplice A. Asongu & Jacinta C. Nwachukwu, 2016. "Mobile Phone Penetration, Mobile Banking and Inclusive Development in Africa," The African Finance Journal, Africagrowth Institute, vol. 18(1), pages 34-52.
    2. Nguyen, Vu Hong Thai & Boateng, Agyenim, 2015. "An analysis of involuntary excess reserves, monetary policy and risk-taking behaviour of Chinese Banks," International Review of Financial Analysis, Elsevier, vol. 37(C), pages 63-72.

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