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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
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Cyclicality of Bank Liquidity Creation, Journal of International Financial Markets, Institutions and Money July (2018). Davydov, Denis; Fungáčová, Zuzana; Weill, Laurent

Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
All authors as text Davydov, Denis; Fungáčová, Zuzana; Weill, Laurent 
Number of authors
Status Published
Year of publication 2018 
Date 23.02.2018 
Name of article Cyclicality of Bank Liquidity Creation 
Name of journal Journal of International Financial Markets, Institutions and Money
Volume of issue 55 
Number of issue July 
Pages 81-93 
Abstract This paper investigates the cyclicality of bank liquidity creation. Since liquidity creation is a major economic function of banks, their liquidity creation behavior may amplify business cycle fluctuations. Using the methodology of Berger and Bouwman (2009) to compute liquidity creation measures, we analyze the relation between GDP growth and liquidity creation of Russian banks from 2004 to 2015. Detailed quarterly data on a very large sample of banks and coexistence of different bank ownership types (state-owned, domestic private and foreign banks), makes Russia an ideal natural laboratory for study of cyclicality of liquidity creation for banks. We find that liquidity creation of banks is procyclical. We show that the liquidity creation behavior of state-owned banks and foreign-owned banks is similar to that of domestic private banks in terms of procyclicality. We further find that the magnitude of procyclicality is higher for liquidity creation than for lending. Thus, while ownership of banks does not influence the cyclicality of bank liquidity creation, liquidity creation behavior of banks can amplify business cycle fluctuations.
Free text descriptor in Finnish pankit; likviditeetti; suhdanteet; Venäjä; ulkomaiset pankit; valtion pankit; yksityiset pankit 
Free text descriptor in English Bank; Liquidity creation; Business cycles; State ownership 
JEL-codes G21 
ISSN / e-ISSN 1042-4431 
auki Internet addresses
Additional information Available online 24 February 2018.