How Changes in Global Liquidity Affect Dynamics of Banks’ Leverage: A Case in Hong Kong

15 Pages Posted: 3 Jun 2020

See all articles by Kelvin Ho

Kelvin Ho

Hong Kong Monetary Authority

Cho‐Hoi Hui

Hong Kong Monetary Authority

Ka‐Fai Li

affiliation not provided to SSRN

Jim Wong

Hong Kong Monetary Authority

Date Written: August 2019

Abstract

This paper examines how abundant global liquidity could influence the adjustment of banks’ leverage. Using banks in Hong Kong as an example, we find that the global liquidity effect is significant, and that mean reversion of banks’ leverage may under certain circumstances be more than offset by abundant global liquidity. Furthermore, we find that changes in global liquidity not only affect the level of leverage adjustment but also the adjustment speed of banks’ leverage.

Suggested Citation

Ho, Kelvin and Hui, Cho‐Hoi and Li, Ka‐Fai and Wong, Jim, How Changes in Global Liquidity Affect Dynamics of Banks’ Leverage: A Case in Hong Kong (August 2019). Pacific Economic Review, Vol. 24, Issue 3, pp. 493-507, 2019, Available at SSRN: https://ssrn.com/abstract=3616219 or http://dx.doi.org/10.1111/1468-0106.12263

Kelvin Ho (Contact Author)

Hong Kong Monetary Authority ( email )

55/F, Two International Finance Centre,
8 Finance Street, Central,
Hong Kong
Hong Kong

Cho‐Hoi Hui

Hong Kong Monetary Authority

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

Ka‐Fai Li

affiliation not provided to SSRN

No Address Available

Jim Wong

Hong Kong Monetary Authority ( email )

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

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