Bank size and liquidity creation

Jijun Niu

Applied Economics Letters, 2023, vol. 30, issue 2, 157-161

Abstract: This paper examines the relation between bank size and liquidity creation. Using panel data on US banks between 2001:Q1 and 2016:Q4, we find that the relation is negative before and during the financial crisis of 2007–2009, but positive after the crisis. We also find that size is positively related to asset-side liquidity creation, but negatively related to liability-side liquidity creation. Overall, our results suggest that the relation between bank size and liquidity creation is influenced by the aggregate economic environment, and shed light on why previous researchers have found mixed results.

Date: 2023
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DOI: 10.1080/13504851.2021.1980194

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