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Country Risk, Regulation, and Liquidity Transformation in Palestine and Neighboring Countries

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  • Luis Otero González
  • Sami Othman Ashour
  • Jose Antonio Redondo-López
  • Luis Ignacio Rodríguez Gil

Abstract

This study analyzes the impact of economic, financial, and political instability on the liquidity transformation of banks operating in unstable environments. Our main goal is to assess the relationship between overall risk in a country and liquidity transformation. With this goal in mind, we use a sample of five Middle Eastern countries during the period 2005–2010. Our results showed that the high-risk environment has a significant and negative impact on both liquidity transformation and the extension of credit. In addition, we conclude that high capital requirements may reduce further lending, while imposing liquidity requirements seems to be a better strategy for enhancing liquidity transformation.

Suggested Citation

  • Luis Otero González & Sami Othman Ashour & Jose Antonio Redondo-López & Luis Ignacio Rodríguez Gil, 2018. "Country Risk, Regulation, and Liquidity Transformation in Palestine and Neighboring Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(6), pages 1375-1390, May.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:6:p:1375-1390
    DOI: 10.1080/1540496X.2017.1285224
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    Cited by:

    1. Maroun, George & Fromentin, Vincent, 2024. "Financial instability in Lebanon: Do the liquidity creation and performance of banks matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 96(C).
    2. González, Luis Otero & Razia, Alaa & Búa, Milagros Vivel & Sestayo, Rubén Lado, 2019. "Market structure, performance, and efficiency: Evidence from the MENA banking sector," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 84-101.

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