Item
Bank Liquidity in Disstressed Macro-Economic Conditions: The Case of Zimbabwe
- Title
- Bank Liquidity in Disstressed Macro-Economic Conditions: The Case of Zimbabwe
- Creator
- Gumbo Lillian
- Njerekai Cleopas
- Murungu Collade
- Damabaza James
- Abstract
-
The bank liquidity phenomenon remains an unending theme of much debate among banking sector officials and the general banking public since it has the tenacity to derail economic activities in the event of chronic macro-economic fluctuations. Unstable macro-economic environments are a formidable threat to bank liquidity positions as they play a significant role in deteriorating banks’ assets value which often diminishes banks’ liquidity. In the last two decades, the Zimbabwean economy has undergone periods of unstable economic conditions whose impact on the banking sector and especially on bank liquidity needs to be analysed so that appropriate intervention strategies can be designed to mitigate negative impacts in the event of recurrences. To analyse the liquidity positions of the country during these two decades of economic downturn, this research employed panel data stretching from 2010 to 2018 and panel regression models, to investigate the potential impact of macroeconomic changes on Zimbabwe’s bank liquidity. The model’s regressors were inflation, gross domestic product, lending interest rate, and real interest rate. It also included one microeconomic variable, namely bank size. Findings from this research revealed that macroeconomic changes inversely affected bank liquidity as evidenced by a negative nexus between bank liquidity measured by cash to total assets, loans to total assets, loans to deposits, deposits to total assets and an array of other macroeconomic factors under study with bank size displaying compelling apositive linear relationship. The study recommends the need to strategically propel policies that eliminate economic rigidities and the transitory deposits syndrome to strengthen the national savings’ power of the economy as this will improve bank liquidity through increased savings and bank deposit base
Keywords:
Keywords: bank liquidity, liquidity ratios,macro-economic factor, distressed economic environment, regressors
- Date
- 2020
- Source
- Global Journal of Management and Business Research: C Finance
- volume
- 20
- issue
- 5