Institutions, Capital control Policy, and Liquidity Creation in Sub- Saharan Africa

Abstract The paper examines the role of institutional quality in the relationship between capital control policy and bank liquidity creation in Sub-Saharan Africa. The paper uses international dataset of 63 banks in twenty (20) Sub-Saharan Africa countries from 2007–2019. The paper adopts panel fixed effect regression model for the estimation. The results indicate that institutional quality and capital control policy have direct positive impact on banks liquidity creation. The results further indicate that institutional quality plays positive and significant role in the relationship between capital control policy and bank liquidity creation. Regulatory capital, bank capital and bank size increase banks liquidity creation. However, floating exchange rate regime, bank risk and inflation do not increase bank liquidity creation.