Sources of Liquidity and Liquidity Shortages |
| |
| Institution: | 1. Department of Finance, University of Illinois Urbana-Champaign, United States;2. Department of Finance, Erasmus University Rotterdam, Netherlands;1. Bank of Canada, 234 Wellington St, Ottawa, ON K1A 0G9, Canada;2. Centre for Economic Policy Research, London, United Kingdom;1. D’Amore-McKim School of Business, Northeastern University, USA;2. Olin Business School, Washington University in St. Louis, USA;1. Federal Reserve Board, Division of Monetary Affairs, Board of Governors of the Federal Reserve System, USA;2. Robert Day School of Economics and Finance, Claremont McKenna College, USA;1. London School of Economics and Political Science, Centre for Economic Policy Research (CEPR), and European Corporate Governance Institute (ECGI), Houghton Street, London WC2A 2AE, United Kingdom;2. London School of Economics and Political Science and European Corporate Governance Institute (ECGI);3. Centre for Economic Performance (CEP) and Copenhagen Business School, Frederiksberg, Denmark;4. London School of Economics and Political Science, Houghton Street, London WC2A 2AE, United Kingdom;1. Department of Economics University of Birmingham, United Kingdom;2. Department of Economics Carleton University, United Kingdom |
| |
| Abstract: | We develop a model of liquidity shortages that incorporates a general equilibrium feature of liquidity: when banks hold more liquidity, other agents in the economy hold less of it and will supply less in times of crisis. We show that the private holdings of liquidity at banks are inefficient, with the direction of the bias being determined by the characteristics of the suppliers of liquidity to banks. Minimum liquidity requirements for banks may reduce welfare; in such cases interest rate policies that stimulate the ex-post supply of liquidity can restore efficiency. Overall, our results show that optimal liquidity policies critically depend on a financial institution’s (marginal) source of liquidity and will hence differ across institutions of different types. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
