Effect of liquidity risk on the cost of financing the financial system: an analysis for the Peruvian case, period 2015-2020
Abstract
The profitability of financial entities through the cost of financing can be affected by scenarios of liquidity risk stress, so this research seeks to answer the question: Does the liquidity risk differentiated in legal, natural, foreign currency, and foreign currency financing? national have any effect on the financing cost of multiple banking entities, period September 2015-November 2020? The objective was to analyze the liquidity risk of commercial banking in the Peruvian financial system through the volatility of deposits and to estimate the effect on the profitability of commercial banking through the cost of financing, taking into account the differences between legal financing, natural financing, financing in foreign currency and in national currency. The method that was applied is a model of autoregressive vectors (VAR) and impulse response functions, in addition to applying the GARCH model to find the level of volatility of the data. We worked with data from the Superintendence of Banking, Insurance, and AFPs (SBS), using Eviews 10. It was determined that the volatility of deposits in national currency explains the behavior of the cost of financing, that is, the greater the volatility of deposits in currency national generates higher financing costs, likewise; it was found that the volatility of deposits from legal entities, the volatility of deposits from natural persons and the volatility of deposits in foreign currency does not explain the behavior of the financing cost.
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