Liquidity Hoarding and Uncertainty for a Small Open Economy

Using quarterly data on the banking sector covering the period 2002–2020, this chapter assesses the impact of uncertainty on banks’ liquidity hoarding in Qatar. To implement this empirically, we utilize the country-specific uncertainty measure and integrate it with a novel measure of bank-specific liquidity hoarding developed in recent research. The findings reveal that banks respond to economic uncertainty by increasing liquidity hoarding, especially on the asset side of their balance sheet, and there is a differential impact for Islamic banks, that too primarily on their asset side. Robustness tests validate these findings.