Natural Disasters and Bank Liquidity Creation in Sub-Saharan African Countries: Evidence from Banks Panel Dat

Abstract

This paper investigates the effects of natural disasters on bank liquidity creation in sub-Saharan African during the period 1988-2018. Using bank-level data from more than 30 countries, we find that natural disasters affect negatively the liquidity creation in the region. This impact is mainly channeled through the asset-side activities of banks. We also find heterogeneous impact of natural disasters on bank liquidity creation based on the size of banks, the magnitude of disasters and the income level of countries. Moreover, these effects are mainly observed when disasters strike on a large-scale. On the contrary, there is no significant difference depending on whether or not the disaster is climatic in origin. These results support policies aimed at strengthening the resilience of African financial systems in a context where losses related to natural disasters are likely to increase in the coming years.

Keywords: Natural disasters, bank liquidity, Africa Classification JEL G21, O16, O55