BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 7/2015:
Does bank liquidity creation contribute to economic growth? Evidence from Russia
Jarko Fidrmuc ()
, Zuzana Fungácová ()
and Laurent Weill ()
Abstract: The financial crisis has shown that the liquidity creation
function of banks is critical for the economy. In this paper, we
empirically investigate whether bank liquidity creation fosters economic
growth in a large emerging market, Russia. We follow the methodology of
Berger and Bouwman (2009) to measure bank liquidity creation using a rich
and exhaustive dataset of Russian banks. We perform fixed effects and GMM
estimations to examine the relation of liquidity creation to economic
growth for Russian regions in the period 2004–2012. Our results suggest
that bank liquidity creation fosters economic growth. This effect was not
washed out by the financial crisis. Our conclusion thus supports a positive
impact of financial development on economic growth in Russia.
Keywords: growth; bank liquidity creation; financial development; (follow links to similar papers)
JEL-Codes: E44; G21; (follow links to similar papers)
23 pages, March 5, 2015
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