Internal conflict and Bank liquidity creation: Evidence from the belt and Road initiative |
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| Institution: | 1. Bo Gao’s contact information is School of Economics, Jilin University, 2699 Qianjin St, Chaoyang, Changchun, Jilin, China;2. Junjiang Li’s contact information is School of Economics, Jilin University, 2699 Qianjin St, Chaoyang, Changchun, Jilin, China;3. Benye Shi’s contact information is School of Economics, Jilin University, 2699 Qianjin St, Chaoyang, Changchun, Jilin, China;4. Xiaojuan Wang’s contact information is School of Economics, Jilin University, 2699 Qianjin St, Chaoyang, Changchun, Jilin, China |
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| Abstract: | The Belt and Road Initiative is the most important international economic strategy in the 21st Century initiated by China. In this paper, we conduct the first international study on the effects of the host country’s internal conflict risk of the Belt and Road Initiative on bank liquidity creation, one of the key functions banks provide for the public. We find that the host country’s internal conflict risk negatively affects bank liquidity creation. The results are also economically significant and robust to subsample tests. It also indicates that Chinese firms that will conduct foreign investments in the countries of the Belt and Road Initiative should take the host country’s internal conflict risk into account. |
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| Keywords: | Bank liquidity creation The Belt and Road initiative Internal conflict |
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