Estimating Liquidity Created by Banks in Pakistan

Sabahat Sabahat ()
Additional contact information
Sabahat Sabahat: State Bank of Pakistan

No 86, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: The saving-investment facilitation, the core function of the banking system results in liquidity creation. The on-balance sheet and off-balance sheet activities of banks play a vital role in liquidity provision: banks create liquidity while actively managing their portfolios of assets and liabilities of different maturities. This study attempts to measure the liquidity created by Pakistan’s banking system using methods employed by Berger and Bouwman (2009). Four measures LIC-C1, LIC-C2, LIC-T1 and LIC-T2 have been constructed for banks. We also group banks according to their size. Analyses of these measures indicate that, compared to other measures, the LIC-C1 measure records the highest amount of liquidity created during Sep07-Jun16. In absolute terms, liquidity of Rs 2.55 trillion was created at the end of Jun 2016, equal to 16.5 percent of the total assets of the banking industry. Further, a disaggregated analysis shows that most of the participation has come from large banks; medium sized banks’ ability remained subdued, whereas the group of small banks performed well in liquidity provision.

Keywords: Liquidity Creation; Banking System; Balance Sheet (search for similar items in EconPapers)
JEL-codes: E50 E58 G10 G21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2017-03
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sbp.org.pk/publications/wpapers/2017/wp86.pdf First version, 2017 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.sbp.org.pk/publications/wpapers/2017/wp86.pdf [301 Moved Permanently]--> https://www.sbp.org.pk/publications/wpapers/2017/wp86.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sbp:wpaper:86

Access Statistics for this paper

More papers in SBP Working Paper Series from State Bank of Pakistan, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Faisal Saleem ().