We revisit a central task of the extant liquidity literature, which is to identify effective measures of liquidity, in the context of sovereign bonds and the new Basel III regulatory framework. We critically assess the influential practice of identifying the best liquidity measures based on...

We propose a simple model that captures the link between bank and sovereign credit risk. It allows evaluating policy options to address this 'doom loop' in which the government may need to raise debt to recapitalise banks, and an increase in government debt raises sovereign risk and in turn...