The Impacts of Liquidity Creation on Banking Stability: An Empirical Research in ASEAN-5

Thanh Nga Thi Tran () and Xuân Linh Nguyen Tran ()
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Thanh Nga Thi Tran: Faculty of Finance – Banking, University of Finance - Marketing, Ho Chi Minh City, Viet Nam
Xuân Linh Nguyen Tran: Faculty of Finance – Banking, University of Finance - Marketing, Ho Chi Minh City, Viet Nam

Journal of Central Banking Theory and Practice, 2025, vol. 14, issue 3, 243-267

Abstract: Using both GMM estimation and the Bayesian approaches during the period of 2007 to 2021 to examine the impacts of liquidity creation (LC) on banking stability (Bank Stability-BS) on the sample of 53 banks in 5 Southeast Asian countries (ASEAN-5), the author has become a pioneer that carries out the first empirical study applying two approaches, which provides a broader perspective on the effects of liquidity creation on bank stability. Positive impacts of Liquidity Creation (LC) on the financial stability revealed from both approaches have contributed important management implications to the banking industry in ASEAN-5 in particular, and emerging and developing economies in general. The research also enriches the literature overview on the relationship between Liquidity Creation (LC) and bank stability.

Keywords: Southeast Asia; Banking stability; Liquidity Creation; GMM; the Bayes method. (search for similar items in EconPapers)
JEL-codes: G21 G22 G4 (search for similar items in EconPapers)
Date: 2025
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