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The Impacts of Liquidity Creation on Banking Stability: An Empirical Research in ASEAN-5

Author

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  • Thanh Nga Thi Tran

    (Faculty of Finance – Banking, University of Finance - Marketing, Ho Chi Minh City, Viet Nam)

  • Xuân Linh Nguyen Tran

    (Faculty of Finance – Banking, University of Finance - Marketing, Ho Chi Minh City, Viet Nam)

Abstract

Using both GMM estimation and the Bayesian approaches during the period of 2007 to 2021 to examine the impacts of liquidity creation (LC) on banking stability (Bank Stability-BS) on the sample of 53 banks in 5 Southeast Asian countries (ASEAN-5), the author has become a pioneer that carries out the first empirical study applying two approaches, which provides a broader perspective on the effects of liquidity creation on bank stability. Positive impacts of Liquidity Creation (LC) on the financial stability revealed from both approaches have contributed important management implications to the banking industry in ASEAN-5 in particular, and emerging and developing economies in general. The research also enriches the literature overview on the relationship between Liquidity Creation (LC) and bank stability.

Suggested Citation

  • Thanh Nga Thi Tran & Xuân Linh Nguyen Tran, 2025. "The Impacts of Liquidity Creation on Banking Stability: An Empirical Research in ASEAN-5," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 14(3), pages 243-267.
    • Handle: RePEc:cbk:journl:v:14:y:2025:i:3:p:243-267
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G4 - Financial Economics - - Behavioral Finance

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