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ISSN: 2306-3483 (Online), 2071-8330 (Print)

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Does Kyrgyz banking system liquidity provide economic growth?

Vol. 15, No 4, 2022


Indrit Hoxha


School of Business Administration, Penn State Harrisburg,

Pennsylvania, US

ORCID 0000-0003-0857-5696

Does Kyrgyz banking system liquidity provide economic growth?

Nurlan Atabaev


School of Entrepreneurship and Business Administration, 

American University of Central Asia, 

Bishkek, Kyrgyzstan

ORCID 0000-0002-4024-1226

Begimai Marlenova


TUM School of Management, Technical University of Munich,

Heilbronn, Germany

ORCID 0000-0003-1608-7836

Gulnaz Atabaeva


Liberal Arts and Sciences Department, 

American University of Central Asia, 

Bishkek, Kyrgyzstan

ORCID 0000-0001-6477-6228

Ibrahim Keles


Frontier Schools, 

Kansas City MO, USA

ORCID 0000-0001-6439-5740 



Abstract. The relationship between the liquidity ratio, the economy and the banking system of a country is a popular subject among academics. This research aims to understand this connection for Kyrgyzstan, a developing economy. The Vector Auto Regression approach was used to trace the association of liquidity ratio to loan and deposit volumes, interest income, net interest income, treasury bill volume, and gross domestic product based on the quarterly data. The data was obtained from various publications of the National Bank of the Kyrgyz Republic. The primary literature indicates that bank liquidity has an inverse correlation not only with bank profitability but also with economic growth. The findings confirm a similar relationship for Kyrgyzstan. Furthermore, liquidity has a positive relationship to treasury bills volume, but a negative correlation to economic growth. However, there was no significant correlation between the liquidity ratio and deposit volumes. Therefore, this paper found that high liquidity ratio of the Kyrgyz banking system negatively effects both the profitability of the banks and economic growth. 


Received: February, 2022

1st Revision: October, 2022

Accepted: December, 2022


DOI: 10.14254/2071-8330.2022/15-4/15


JEL ClassificationE5, E6, O4

Keywordsliquidity ratio, profitability, deposit volume, treasury bills, gross domestic product, vector autoregression