Huang, R.; Ratnovksi, L. - Tilburg University, Center for Economic Research - 2009
literature mainly points to the "bright side" of wholesale funding: sophisticated financiers can monitor banks, disciplining bad … ones but refinancing solvent ones. This paper models a "dark side" of wholesale funding. In an environment with a costless … public signals, triggering inefficient liquidations. We show that the "dark side" of wholesale funding dominates the "bright …