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We argue that there is a connection between the interbank market for liquidity and the broader financial markets, which has its basis in demand for liquidity by banks. Tightness in the interbank market for liquidity leads banks to engage in what we term "liquidity pull-back," which involves...
Persistent link: https://www.econbiz.de/10008550326
The Paper provides a formalization of the monetary economics folk proposition that government fiat money is an asset of the holder (the private sector) but not a liability of the issuer (the state). Money is 'net wealth' in the limited sense that, after consolidation of the intertemporal budget...
Persistent link: https://www.econbiz.de/10005504641
the central bank is uninformative about the financial resources it has at its disposal and about its ability to act as an … exchange-denominated liabilities or index-linked liabilities, it will always be possible for the central bank to ensure its … central bank solvency may undermine price stability. In addition, there are limits to the amount of real resources the central …
Persistent link: https://www.econbiz.de/10005656271
, even ignoring interconnectedness issues, the failure of a bank causes a larger welfare loss than the failure of other … optimal fiscal response to such a shock is to help people, not banks, and the size of this response should be larger if a bank …
Persistent link: https://www.econbiz.de/10011084676
We study the role of fiscal policy in a complete markets model where the only friction is the non-pledgeability of human capital. We show that the competitive equilibrium is constrained inefficient, leading to too little risky investment. We also show that fiscal policy following a large...
Persistent link: https://www.econbiz.de/10011084716
We study an economy where the lack of a simultaneous double coincidence of wants creates the need for a relatively safe asset (money). We show that, even in the absence of asymmetric information or an agency problem, the private provision of liquidity is inefficient. The reason is that liquidity...
Persistent link: https://www.econbiz.de/10009246599
Shocks to bank lending, risk-taking and securitization activities that are orthogonal to real economy and monetary … type of shock. Expansionary securitization shocks lead to a permanent rise in real GDP and a fall in inflation. Bank … using a model of bank risk-taking and securitization. …
Persistent link: https://www.econbiz.de/10011262887
also contributed, through the deeply subsidised bank funding it provided through the 3-year LTROs, half of a mechanism to …
Persistent link: https://www.econbiz.de/10011083551
lending to the banks’ owners, although they strongly maintained otherwise in autumn 2007. Neither the FSA nor the Central Bank …
Persistent link: https://www.econbiz.de/10011084274
We develop a dynamic stochastic general equilibrium model to study bank risk and sovereign risk interdependence in the …
Persistent link: https://www.econbiz.de/10011201352