Bank Capital and Liquidity Creation in Asia Pacific

28 Pages Posted: 26 Feb 2016

See all articles by Maggie Fu

Maggie Fu

University of Macau - Faculty of Business Administration

Yongjia (Rebecca) Lin

Macao University of Science and Technology (MUST) - School of Business

Philip Molyneux

University of Sharjah; University of Sharjah - College of Business Administration

Date Written: April 2016

Abstract

We calculate liquidity creation for a large sample of commercial banks in 14 Asia‐Pacific economies from 2005 to 2012. We find that banks in this region created $7.83 trillion in liquidity in 2012, or approximately 3.24 times the total liquidity created in 2005. Large banks and those based in Developing Asia created the highest liquidity. We also investigate the bicausal relationship between liquidity creation and regulatory capital and find that the trade‐off between the benefits of financial stability induced by enhanced capital requirements and those of higher liquidity creation is applicable to all of the sample banks, regardless of bank size and economic region.

JEL Classification: G21, G28

Suggested Citation

Fu, Xiaoqing and Lin, Yongjia (Rebecca) and Molyneux, Philip and Molyneux, Philip, Bank Capital and Liquidity Creation in Asia Pacific (April 2016). Economic Inquiry, Vol. 54, Issue 2, pp. 966-993, 2016, Available at SSRN: https://ssrn.com/abstract=2738295 or http://dx.doi.org/10.1111/ecin.12308

Xiaoqing Fu (Contact Author)

University of Macau - Faculty of Business Administration ( email )

Macau
(853) 397-4747 (Phone)
(853) 838320 (Fax)

HOME PAGE: http://www.umac.mo/fba/staff/maggiefu.html

Yongjia (Rebecca) Lin

Macao University of Science and Technology (MUST) - School of Business ( email )

Avenida Wai Long
Taipa
Macau

Philip Molyneux

University of Sharjah ( email )

College of Business Administration
University of Sharjah
Sharjah, Sharjah
United Arab Emirates

HOME PAGE: http://www.sharjah.ac.ae/en/academics/Colleges/business/Pages/ppl_detail.aspx?mcid=1

University of Sharjah - College of Business Administration ( email )

University City Road
Sharjah, 27272
United Arab Emirates

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