The Effects of Economic, Financial and Banking Shocks on The Liquidity Creation In Iranian Banks

Banks, as financial intermediaries, play an important role in the economy and financial markets by allocating financial resources. Due to the importance of creating banks' liquidity, in this research, first, the liquidity creation index was calculated using Berger and Bauman's (2009) method, and then using two generalized moment models (GMM) and panel vector auto regression model (PVAR), the effects of various impulses (economic, financial and banking) on the creation of liquidity in Iranian banks during the period of 2015-2018 have been investigated. The estimation results of the models indicate that impulses of GDP and interest rate of bank deposits have a positive effect and impulses of credit risk, interest rate of facilities and effective exchange rate have a negative effect on the creation of banks' liquidity. The research results show that a one percent increase in credit risk, interest rate of bank facilities and effective exchange rate causes a decrease of 0.228, 0.525 and 0.468 percent of banks' liquidity, respectively, while a one percent increase in bank deposit interest rate and The gross domestic product increases the liquidity of banks by 0.448 and 0.014 percent. Also, in the investigation of Granger causality between the variables, the two-way causal relationship between the variables has been confirmed. The results of PVAR method are consistent with GMM and confirm it. It can be argued that the results obtained from research models have sufficient strength.