Fractal characteristics analysis and fluctuation trend prediction of commercial bank funding liquidity

Xu Wu and Ling-Ling Li

Applied Economics, 2022, vol. 54, issue 59, 6784-6796

Abstract: Funding liquidity has been considered as the lifeline of commercial banks. If there are abnormal fluctuations in funding liquidity, it may lead to bank runs, which may bring about the destruction of commercial banks and even spread to cause a financial crisis. Therefore, exploring the fluctuation characteristics and trend prediction of commercial bank funding liquidity has traditionally attracted much attention. Based on this, this paper analyzes the fluctuation characteristics of commercial bank funding liquidity by Multi-Fractal Detrended Fluctuation Analysis (MF-DFA), and innovatively uses the Moving Trend Entropy Dimension (MTED) for commercial bank funding liquidity fluctuation trend prediction. The results of the study show that the commercial bank funding liquidity is multifractal, so it has predictability; MTED can not only accurately predict the fluctuation trend of commercial bank funding liquidity, but also has robustness. Through effective monitoring of funding liquidity, commercial banks can develop their funding liquidity risk management programs and improve the effectiveness of their own funding liquidity risk control. At the same time, regulators can also achieve the goal of preventing and resolving funding liquidity risks as well as maintaining financial stability.

Date: 2022
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DOI: 10.1080/00036846.2022.2083571

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