Table 8 Robustness checks in the function of liquidity creation growth.

From: The monetary policy pass-through mechanism: Is the search-for-yield incentive at work?

 

Dependent variable: the growth rate of bank liquidity creation (“cat fat” measure)

 

Two-step system GMM

Fixed-effects regression with Driscoll–Kraay standard errors

 

(1) SFYroa

(2) SFYroe

(3) SFYroa

(4) SFYroe

Lagged dependent variable

0.164*** (0.019)

0.171*** (0.017)

  

Lending rates

–1.091** (0.447)

–1.001** (0.419)

–2.972*** (0.459)

–3.073*** (0.507)

Lending rates*Search for yield

1.399** (0.659)

0.349*** (0.080)

2.876* (1.574)

0.369*** (0.105)

Search for yield

–2.212 (7.119)

–3.043*** (0.852)

–22.907 (15.567)

–3.315*** (1.033)

Control variables

Yes

Yes

Yes

Yes

Number of observations

311

311

324

324

Number of banks

31

31

31

31

Number of instruments

29

29

  

AR(1) test

0.001

0.001

  

AR(2) test

0.357

0.282

  

Hansen test

0.489

0.683

  

F-test

  

0.000

0.000

R-squared

  

0.127

0.128

  1. This table reports the regression results estimated by the two-step system GMM dynamic panel model (columns 1–2) and the fixed-effects static model with Driscoll–Kraay standard errors (columns 3–4). The “search for yield” variable used (SFYroa and SFYroe, separately) is given at the top of each column. Symbols ***, **, and * indicate significance at the 1, 5, and 10% levels, respectively. Robust standard errors are expressed in parentheses. All test results are shown with p-values (Hansen test, AR(1)/AR(2) tests, and F-test). For the definitions of all variables employed, see Table 1.
  2. We also perform the robustness checks for the function of liquidity creation growth using the “cat nonfat” measure, and the estimates yield identical results. We do not report them for the sake of brevity.
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