Zimbabwean Commercial Banks Liquidity and Its Determinants

Abstract

The liquidity problems are bedeviling Zimbabwean commercial banks since the introduction of multi-currency system and this is impacting the economic development. After the 2003 to 2004 liquidity crisis, the central bank has re-emphasised on liquidity needs, and thus liquidity is very important for functioning of financial markets and the banking sector. The aim of this paper is therefore to identify determinants of liquidity of Zimbabwe commercial banks. The data cover the period from January 2010 to December 2011. The regression analysis was used and it has been found that there is a positive link between bank liquidity and capital adequacy, total assets, gross domestic product and bank rate. We have found that the adoption of multi-currency, inflation rate and business cycle have a negative impact on liquidity. It seems the banks size and their liquidity is positively correlated.