The financial crisis of 2007-2008 highlighted the risks that liquidity spirals pose to financial stability. We introduce a novel method for studying liquidity spirals and use this method to identify spirals before stock prices plummet and funding markets lock up. We show that liquidity spirals...

We argue that the rapid asset growth of nonbank financial intermediaries (NBFIs) relative to banks is the outcome of transformations of risks between banks and NBFIs that increase the interconnectedness of the two sectors. These transformations are consistent with avoiding tighter, post-GFC bank...

Bank failures can stem from runs on otherwise solvent banks or from losses that render banks insolvent, regardless of withdrawals. Disentangling the relative importance of liquidity and solvency in explaining bank failures is central to understanding financial crises and designing effective...

This paper examines the relationship between location, liquidity, and prices in housing markets. We construct spatial datasets for German and U.S. cities and show that liquidity and prices decline with distance to the city center. To rationalize these results, we build a structural model with...

The Financial Lobster Bias describes how SMEs, driven by distorted liquidity perceptions, engage in aggressive expansion until financial breakdown occurs. Using data from 10,412 Spanish SMEs (2000-2024), this study shows that liquidity misperception-measured through two versions of the Liquidity...

Effective monetary policy requires maintaining the short-term interbank rate close to the policy rate while limiting its volatility, ensuring smooth transmission, and reducing banks' liquidity and interest rate risks. This paper seeks to identify and explain the drivers of volatility in...

Using 33 years of intraday Treasury data, we provide the first high-frequency evidence on auction-day price pressure: yields rise in the hours before auction and reverse afterward. This pressure strengthens when dealers face tighter risk-bearing constraints and weakens when investor demand is...

Securities dealers play a central role intermediating funds in the U.S. short-term money markets. This intermediation involves risk, which can be mitigated by holding buffers of liquid securities. The cost of holding these buffers - the liquidity risk premium - is driven by the opportunity cost...

Fiat-backed stablecoins are expanding, and their issuers may attain systemic relevance as reserve portfolios grow and as they become increasingly intertwined with financial markets. This paper analyzes the resulting risks and the design choices that can mitigate them. A detailed...

In this paper, we seek to ascertain whether the recently developed ordered fuzzy number (OFN) representation of a limit order book (LOB) by Marszałek and Burczyński (2024) may serve as a measure of stock liquidity. In particular, we aim to test whether this measure contains similar or distinct...

This study evaluates the early impact of Central Bank Digital Currencies (CBDCs) on key financial indicators in The Bahamas, focusing on the introduction of the SandDollar-the world's first fully implemented retail CBDC. Using the Synthetic Control Method (SCM), the analysis constructs...

This policy paper examines the effects of the introduction of the MiFID II / MiFIR framework on the transparency regime for sovereign bonds. The main purpose of the framework is to provide markets with real-time information and lower market asymmetries, thereby increasing liquidity in the...

Mutton prices in China carry significant economic and social implications, yet their macro-financial drivers remain insufficiently understood. Based on monthly data from 2003 to 2025, this paper employs Ensemble Empirical Mode Decomposition, Vector Autoregression, and wavelet coherence analysis...

Central banks around the world routinely engage in asset purchases in secondary markets as part of implementing monetary policy or enhancing market liquidity, but the effects of such interventions are not yet fully understood. We develop a multi-asset general equilibrium model in which the...

We investigate high-frequency traders' behavior in the context of the fastest and most extreme price movements (EPMs) that can be observed in the market, specifically ultra-fast flash events, challenging the methodologies employed in the academic and practitioner literature for identifying...

This study identifies a nonlinear relationship among liquidity, tracking error, and risk-adjusted performance in JETFs. Collecting daily data for 1077 JETFs from January 2008 to April 2022, we find a concave association, whereby both highly liquid and highly illiquid JETFs exhibit lower...

This paper examines the existence and magnitude of an "LCR premium" in Peru's interbank market by exploiting the July 1, 2019 reform that eliminated the punitive outflow weights on repo collateral under the Liquidity Coverage Ratio (LCR). Using daily transactions from January 2019 to February...

The U.S. Treasury's recently introduced liquidity support buyback program offers a natural setting to evaluate whether providing a regular mechanism for selling less liquid off-the-run Treasury securities can enhance market liquidity. In this paper, I present a direct test of this mechanism and...

This report evaluates four key areas that significantly impact the efficiency and resilience of Chile's financial sector, offering targeted recommendations for improvement. These areas are central bank collateral policy, emergency liquidity assistance, systemwide market support programs, and the...