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Financial intermediation analysis from financial flows

Claudio Oliveira De Moraes (Central Bank of Brazil, Rio de Janeiro, Brazil)
José Americo Pereira Antunes (Banking Supervision, Central Bank of Brazil, Rio de Janeiro, Brazil)
Adriano Rodrigues (Post-Graduate Program in Accounting Sciences, Universidade Federal do Rio de Janeiro, Rio de Janeiro, Brazil)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 2 August 2019

Abstract

Purpose

The purpose of this paper is to analyze the financial friction effect of non-performing loans (NPLs) on financial intermediation (FI) through empirical evidence from the Brazilian experience.

Design/methodology/approach

The authors develop a new variable, financial intermediation flow and a new indicator, FI, both measures of FI. To empirically test FI, the authors use a dynamic panel data framework that draws on 101 banks (December 2000 to December 2015).

Findings

An increase in NPL reduces FI. Thus, NPL amplifies financial friction in FI. This result holds in different time frames, such as the pre-crisis period, the crisis period and the post-crisis period.

Practical implications

The FI measure developed in this study offers the policymakers a possibility to monitor financial stability.

Originality/value

This study adds to this debate by proposing a measure of FI derived from financial flows. This measure allows one to estimate the role of NPL as a financial friction that can pose a threat to financial stability.

Keywords

Acknowledgements

This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.

Citation

De Moraes, C.O., Antunes, J.A.P. and Rodrigues, A. (2019), "Financial intermediation analysis from financial flows", Journal of Economic Studies, Vol. 46 No. 3, pp. 727-747. https://doi.org/10.1108/JES-10-2017-0302

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited