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Volatility spillovers and dynamic correlation between liquidity risk factors in Tunisian banks

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Listed:
  • Dorra Zouari
  • Achraf Ghorbel
  • Sonia Ghorbel-Zouari
  • Younes Boujelbène

Abstract

This paper analyses the volatility spillover and the dynamic correlation between liquidity risks factors in Tunisian banks over 1990:1 2011:12. Based on the BEKK-GARCH estimation results, we find a significant volatility spillover between deposit and loan to economy and between securities portfolio and equity, respectively. Also, the results show a bidirectional volatility transmission between deposit and the most important determinants of liquidity risk. Besides, the dynamic correlation shows that deposits and equity are the main important resources for banks in order to finance economy. With these resources, banks can allocate more credit and invest in securities market. Also, the volatility spillover explains the contagion between all liquidity factors. These findings must induce Tunisian policymakers to impose measures such as exposure limits to reduce the liquidity contagion likelihood, as part of the macro-prudential approach, to stabilise growth.

Suggested Citation

  • Dorra Zouari & Achraf Ghorbel & Sonia Ghorbel-Zouari & Younes Boujelbène, 2014. "Volatility spillovers and dynamic correlation between liquidity risk factors in Tunisian banks," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 6(1), pages 1-26.
    • Handle: RePEc:ids:injmfa:v:6:y:2014:i:1:p:1-26
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    References listed on IDEAS

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