A panel analysis of numerous nations found that bank liquidity creation boosts country and industry growth. Mostly physical investments have this effect. Additionally, countries largely dependent on intangible asset industries do not benefit from liquidity generation. These findings show that liquidity generation is vital but restricted to economic progress, especially in knowledge-based economies. In conclusion, bank liquidity creation drives economic growth, particularly through physical investments.

Image courtesy of interviewee. December 20, 2023