Economics

The complex relationship between credit and liquidity risks: a linear and non-linear analysis for the banking sector

J. Bouslimi, A. Hakimi, et al.

Dive into the intricate dance between credit risk and liquidity risk in Tunisian banks, revealed through cutting-edge analysis by Jihen Bouslimi, Abdelaziz Hakimi, Taha Zaghdoudi, and Kais Tissaoui. This study uncovers surprising threshold effects that could reshape risk management strategies in the banking sector!

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Abstract

This article investigates the reciprocal relationship between credit risk (CR) and liquidity risk (LR) in Tunisian banks from 2000 to 2018 using Seemingly Unrelated Regression (SUR) and Panel Smooth Transition Regression (PSTR) models. Linear analysis reveals a positive relationship between CR and LR in both directions. Non-linear analysis identifies threshold effects: below thresholds of 9.87% for Non-Performing Loans (NPLs) and 102% for the Loan-to-Deposit ratio (LTD), the relationship is negative; above these thresholds, the effect is positive, but only significant for CR's impact on LR. These findings suggest policy implications for managing these risks in the Tunisian banking sector.

Publisher

Humanities & Social Sciences Communications

Published On

Apr 01, 2024

Authors

Jihen Bouslimi, Abdelaziz Hakimi, Taha Zaghdoudi, Kais Tissaoui

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