Abstract

Banks’ liquidity holdings are comfortably above legal or pru dential requirements in most Central American countries. While good for financial stability, high liquidity may nonethe less hinder financial market development and monetary pol icy transmission. Using a panel of 96 commercial banks from Central America, Panama and the Dominican Republic for 2006-2010, we find that the demand for precautionary liquidity buffers is associated with measures of bank’s size, profitabili ty, capitalization, and financial development. Higher liquid ity is also associated with deposit dollarization, reinforcing the monetary policy and market development challenges in

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.