The Determinants Of Excess Liquidity In The Gcc Banking Systems

Résumé: The paper investigates the voluntary (precautionary) and involuntary determinants of excess liquidity in the GCC banking systems using the Two Stage Least Squares (TSLS) method. The results show that the determinants of Excess liquidity in the GCC banking systems vary from country to another. The precautionary determinants reflect the cost of refinancing at the central Bank, the output gap, and the liquidity risks and uncertainty measured by the volatility of currency in circulation to deposit ratio, the volatility of output gap and volatility of total deposits, respectively. The involuntary determinants include oil exports and bank lending rate. They reflect also the movements in bank liabilities and assets, especially the credit to private sector to output ratio, the credit to public sector to output ratio, the private deposits to output ratio, the public deposits to output ratio, and the purchases of government bonds to output ratio. The banks in GCC countries can avoid the cost of excess liquidity by enhancing the credit to private sector and by promoting the economic diversification policies which reduce the uncertainty and liquidity risks.

Publié dans la revue: المجلة الجزائرية للأبحاث والدراسات