Calculation and Analysis of Liquidity Creation Index and Its Effects on Risk-Taking of Commercial Banks in the Iranian Economy with Emphasis on the Credit Risk Index

July 9, 2025Financial Economics فصلنامه اقتصاد مالیOpen Access

View Full Paper

Ask AI

Bookmark

Share

Key Points

This study aims to explore the effects of the liquidity creation index on credit risk in Iranian commercial banks.
Utilized a three-stage method for liquidity creation index calculation from on-balance and off-balance sheet data.
Analyzed data from 17 commercial banks in Iran over the years 2005-2023 using cointegration and causality frameworks.
Employed panel vector autoregression for analyzing the relationship between liquidity and credit risk indices.
The liquidity creation index had a significant positive effect on the credit risk index of commercial banks.
Causality analysis confirmed a one-way relationship from liquidity creation towards the non-performing loans (NPL) index.
Panel regression showed that a one standard deviation shock to the liquidity creation index results in a minor increase in credit risk, while liquidity risk, asset return, and bank size negatively impacted credit risk.

Analyzes the relationship between liquidity creation index and credit risk in commercial banks, indicating important implications.

No abstract yet. The journal hasn't published one we can show.

No takes yet. Share an insight, caveat, or question.

Mahmoudinia et al. (2025) studied this question.

View Full Paper

Ask AI

Bookmark

Share