Liquidity Risk and Long-Term Finance: Evidence from a Natural Experiment

 摘要：Banks in low-income countries face severe liquidity risk due to volatile deposits, which destabilize
their funding, and dysfunctional liquidity markets, which induce expensive interbank and central bank
lending. Such liquidity risk dissuades the transformation of short-term deposits into long-term loans and
deters long-term investment. To validate this mechanism, we exploit a Sharia-compliant levy in Pakistan,
which generates unintended and quasi-experimental variation in liquidity risk, with data from the credit
registry and firm imports. We find that banks with a stronger exposure to liquidity risk lower their supply
of long-term finance, which reduces the long-term investment of connected firms.