Bank liquidity creation and recessions

Chatterjee, Ujjal

doi:10.1016/j.jbankfin.2018.03.002

Cited by 44 publications

(15 citation statements)

References 28 publications

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“…Some of the studies which are more relevant to this study are the ones which explore the relationship between LC and economic output (Berger & Sedunov, 2017; Chatterjee, 2018; Davydov et al, 2018; Fungacova et al, 2013; Fungacova et al, 2013). Chatterjee (2018) used LC as a predictor of recession and found that lower on-balance sheet LC can predict recession four quarters before its occurrence. His study came up with an interesting finding that off-balance sheet LC does not predict recession.…”

Section: Literature Review and Research Hypothesismentioning

confidence: 99%

“…So, it is evident from the above studies that central bank policies may change the behavior of banks regarding LC to a certain extent, that is, central bank may regulate economy by affecting LC. Some of the studies which are more relevant to this study are the ones which explore the relationship between LC and economic output (Berger & Sedunov, 2017;Chatterjee, 2018;Davydov et al, 2018;Fungacova et al, 2013;Fungacova et al, 2013). Chatterjee (2018) used LC as a predictor of recession and found that lower on-balance sheet LC can predict recession four quarters before its occurrence.…”

Section: Literature Review and Research Hypothesismentioning

confidence: 99%

“…Bank loans are considered to be the engines of growth (e.g., Levine & Zervos, 1998) and especially the loans lent by small banks (Berger & Bouwman, 2017;Kashyap & Stein, 1997). At the same time, banks are also considered to be the source of economic distress (Acharya & Naqvi, 2012;Berger & Bouwman, 2009, 2017Chatterjee, 2018;Diamond & Rajan, 2003). So, there exists a linkage between bank performance and economic growth.…”

Section: Introductionmentioning

confidence: 99%

“…Before the research paper of Berger and Bouwman (2009), different researchers used various measures of bank output to relate banks with economic growth (e.g., Deyoung et al, 2004;Duchin & Sosyura, 2014;Laeven & Levine, 2009). However, after Berger and Bouwman (2009), different studies have used their liquidity creation (LC) measures to find the relationship between bank activity and economic growth (Berger & Sedunov, 2017;Chatterjee, 2018;Davydov et al, 2018). Berger and Sedunov (2017) argue that LC is a better measure of bank output than total asset (TA) or grand total asset (GTA) because it not only takes on-balance sheet activities into consideration rather it also accounts for off-balance sheet guarantees, lines of credit and derivatives, and so on.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

What Are The Channels Through Which Bank Liquidity Creation Affects GDP? Evidence From an Emerging Country

Umar

Sial

2021

Sage Open

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Gross domestic product (GDP) depends on myriad factor and financial intermediaries especially banks play a very important role in economic growth and development of a country. They not only lend loans rather also generate liquidity—which is very important for the smooth functioning of an economy. Therefore, this study explores the channels through which bank liquidity creation affects GDP. It uses the data from listed and unlisted Chinese banks ranging from the year 2006 to 2017. The results of the analysis reveal that the liquidity creation by Chinese banks significantly negatively affects economic output. The magnitude of the impact of small-bank liquidity creation is greater than the large banks. Variation in the GDP is explained by current and previous year’s liquidity creation. Cat-fat measure of liquidity creation affects GDP directly as well as through consumption, investment, government expenditure, and net exports channels; however, cat-nonfat measure affects economic output directly and through all aforementioned channels except net exports. Overall, the findings support the hypothesis that liquidity creation affects the economy directly as well as through different channels.

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Section: Literature Review and Research Hypothesismentioning

confidence: 99%

Section: Literature Review and Research Hypothesismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

What Are The Channels Through Which Bank Liquidity Creation Affects GDP? Evidence From an Emerging Country

Umar

Sial

2021

Sage Open

View full text Add to dashboard Cite

show abstract

“…Results based on probit models show that stock market liquidity and forecasts recessions up to three and two quarters ahead respectively, whilst stock market volatility has no forecasting power. Also Chatterjee () examined the relationship between bank liquidity creation and recessions in the USA using probit model. The findings show that lower bank on‐balance sheet liquidity creation predicts recessions four quarters into the future whilst off‐balance sheet liquidity creation does not predict recessions well at longer forecast horizons.…”

Section: Literature Reviewmentioning

confidence: 99%

Forecasting the Probability of Recessions in South Africa: the Role of Decomposed Term Spread and Economic Policy Uncertainty

Aye

Christou

Gil-Alana

et al. 2018

J of Intl Development

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This paper decomposes the term spread into the expectation and the term premium components using a fractional integration approach and subsequently uses same with the economic policy uncertainty index to forecast the probability of recession in South Africa. We use different specifications of the probit model and quarterly data from 1990:1 to 2012:1. Our out-of-sample results show that the model that incorporates the expectation component and economic policy uncertainty provides the best forecast of recession. All three recession periods in our sample were accurately dictated by the prediction models and the best forecast occurred at the four quarters ahead horizon. A robustness check with a longer sample from 1946q1 to 2017q4 but excluding the factors and economic policy uncertainty due to data limitation provided justification for decomposing the term spread as the model with the expected spread turned out to be the best. We draw the implications of these findings.

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Assessing and enhancing operational efficiency in Sierra Leone's retail banking sector: A comparative analysis using CCR and BCC DEA models

Mansaray,

Hongyi,

Sawaneh

2024

Manage Decis Econ

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This study assesses the operational efficiency of 14 Sierra Leone commercial banks from 2020 to 2022, focusing on the adoption of financial innovation, such as digital banking, mobile services, and online payments. The research evaluates banks' performance by leveraging innovations using data envelope analysis (DEA) with constant and variable returns to scale models. Findings show varied efficiency, with some banks excelling and others lagging. The study underscores the need for strategic management and optimization so that banks can benefit fully from financial innovations. The insights inform policymakers and bank managers on enhancing the sector's operational performance through technology integration.

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Bank liquidity creation and recessions

Cited by 44 publications

References 28 publications

What Are The Channels Through Which Bank Liquidity Creation Affects GDP? Evidence From an Emerging Country

What Are The Channels Through Which Bank Liquidity Creation Affects GDP? Evidence From an Emerging Country

Forecasting the Probability of Recessions in South Africa: the Role of Decomposed Term Spread and Economic Policy Uncertainty

Assessing and enhancing operational efficiency in Sierra Leone's retail banking sector: A comparative analysis using CCR and BCC DEA models

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