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Effective and determining factors of liquidity creation of commercial banks in the Iranian economy with emphasis on the role of credit growth and bank size
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Davoud Mahmoudinia *1   , Hamideh Akbarpour MosaAbadi2 |
1- Associate Professor, Economic Department, Vali-e-Asr University of Rafsanjan, Rafsanjan, Iran , d.mahmoudinia@vru.ac.ir
2- Master of Economics, Vali-e-Asr University of Rafsanjan, Rafsanjan Iran |
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Abstract: (11 Views) |
After the global financial crisis, the issue of bank liquidity creation—based on balance sheet structure, its calculation, and its sensitivity to changes in macroeconomic and banking variables—became a contentious topic among economic theorists. On the other hand, the importance of bank size and credit facilities has been recognized as one of the most critical factors influencing liquidity creation. Therefore, this study aims to examine the relationship between bank size, bank credit, and the liquidity creation index of Iranian commercial banks between 2005 and 2023. First, the liquidity creation index was calculated based on balance sheet items, categorized into three classes: cash, semi-cash, and non-cash assets and liabilities. The long-term effects of bank size and bank credit on liquidity creation were analyzed using three models: pooled panel data, generalized method of moments (GMM), and generalized least squares (GLS). The findings reveal a positive relationship between bank size, credit, and the liquidity creation index of commercial banks. Additionally, the Dumitrescu & Hurlin (D&H) causality test indicates a bidirectional causal relationship between liquidity creation and both bank size and credit facilities. Other results show that the credit risk index and capital adequacy ratio have a positive and significant impact on liquidity creation. Finally, the study conducted a sensitivity analysis using pooled mean group (PMG) regression and the Juodis, Karavias & Sarafidis (JKS) causality test to further validate the findings. |
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| Keywords: Liquidity creation, bank size, credits, banking stability, Iranian economy |
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Full-Text [PDF 1246 kb]
(3 Downloads)
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Article type: Research |
Subject:
Special
Received: 2026/05/2 | Accepted: 2025/08/20
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