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Enhancing bank liquidity creation through digital innovation: Exploring the impact of macroprudential policy sentiments

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  • Wang, Li
  • Li, Shangda
  • Fa, Zhan
  • Wang, Yanan

Abstract

This paper investigates the connection between liquidity creation and bank digital innovation using panel data from 129 Chinese banks between 2010 and 2021. The macroprudential policy sentiment is also introduced into our model to explore how it affects the impact of bank digital innovation on liquidity creation. The results show that bank digital innovation can promote their liquidity creation, and this is primarily achieved through improving the profitability and asset quality of the banks. The sentimental effect of macroprudential policy communication strengthens this promotion, and the effect is significant both among banks in regions with strong financial regulation and high financial disintermediation, as well as banks that are not systemically important. The conclusions provide policy implications for utilizing digital innovation in banks effectively in order to cultivate new quality productive forces.

Suggested Citation

  • Wang, Li & Li, Shangda & Fa, Zhan & Wang, Yanan, 2025. "Enhancing bank liquidity creation through digital innovation: Exploring the impact of macroprudential policy sentiments," Emerging Markets Review, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:ememar:v:66:y:2025:i:c:s156601412500024x
    DOI: 10.1016/j.ememar.2025.101275
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