The Influence of Systemic Liquidity Risk on Polish Economic Stability
Posted: 2 Feb 2018
Date Written: January 25, 2018
An increase in risk is of key importance to the economy and to its stability. A higher liquidity risk in the system leads to a lower possibility of shock absorption and a greater probability of the propagation of unfavourable trends. A banking system with smaller liquidity reserves is more vulnerable to the phenomenon of ‘procyclicality’ i.e. the strengthening of economic cycles. A short- and long-term microeconomic risk in banks may, at times of liquidity tension, lead to a significant inhibition of economic growth. An increase in liquidity risk weakens monetary policy mechanisms, while inherent in a progressively greater potential burden on the Bank Guarantee Fund is the risk of a banking crisis becoming a sovereign crisis. The existence of currency liabilities and a long-term currency liquidity risk exposes the Polish economy to a greater transmission of crisis from abroad.
Keywords: risk, system, liquidity
JEL Classification: E61, G20, H10
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