A Spectral Analysis of Aggregate Commercial Bank Liability Management and Its Relationship to Short-Run Earning Asset Behavior

John L. Eatman and Calvin W. Sealey

Journal of Financial and Quantitative Analysis, 1977, vol. 12, issue 5, 767-778

Abstract: In recent years a substantial number of empirical studies have been conducted concerning aggregate commercial bank behavior [2, 8, 11, 14, 15, 17, 18]. Although the scope of these studies has varied widely, none has included an adequate treatment of the relationship between commercial bank liability management and earning asset adjustments. The importance of the relationship between liability management and commercial bank asset behavior has been alluded to in the literature [3, 5, 6, 13, 18]; but there has been very little empirical investigation of the subject. Moreover, little is known about which assets and liabilities are primarily involved. By increasing or decreasing earning assets, the commercial banking system can create or eliminate deposits, thus affecting the supply of both money and bank credit. Since liability management and asset behavior are very closely related, it seems that an adequate understanding of this relationship is essential to understanding the money supply process.

Date: 1977
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