The Influence of Systemic Liquidity Risk on Polish Economic Stability

Posted: 2 Feb 2018

See all articles by Jerzy Gwizdała

Jerzy Gwizdała

University of Gdańsk - Faculty of Management

Date Written: January 25, 2018

Abstract

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

Suggested Citation

Gwizdała, Jerzy, The Influence of Systemic Liquidity Risk on Polish Economic Stability (January 25, 2018). Available at SSRN: https://ssrn.com/abstract=3110108

Jerzy Gwizdała (Contact Author)

University of Gdańsk - Faculty of Management ( email )

ul. Armii Krajowej 101, 81-824, Sopot
ul. Bażyńskiego 1A
Gdańsk, pomorskie 80-952
Poland

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