Implications of Excess Liquidity in Fiji’s Banking System: An Empirical Study

Tiru Jayaraman () and Chee-Keong Choong

MPRA Paper from University Library of Munich, Germany

Abstract: The reasons behind the frequent occurrences of excess liquidity, especially in the recent months since 2007, are well known and documented. They include low investor confidence following the military coups and related political uncertainties with their lingering effects for a while. What are unknown and not studied in detail are the long term effects of excess liquidity on various key economic variables. Utilizing the VAR methodology, this paper examines the effects of excess liquidity on loans, lending rate, exchange rate and price level. The findings are that excess liquidity is a major component of forecast variation in loans, exchange rate and lending rate.

Keywords: Excess liquidity; loans; monetary policy; cointegration test; variance decomposition (search for similar items in EconPapers)
JEL-codes: E42 E43 O11 (search for similar items in EconPapers)
Date: 2012-08-01
New Economics Papers: this item is included in nep-mac and nep-mon
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