We show how the interbank payment system can become illiquid following wide-scale disruptions. Two forces are at play in such disruptions - operational problems and changes in participants' behavior. We model the interbank payment system as an n-player game and utilize the concept of a potential...

This paper analyses the effectiveness of monetary policy during downturns associated with financial crises. Based on a sample of 24 developed countries, our empirical analysis suggests that monetary policy is less effective following a financial crisis as the monetary transmission mechanism is...

We use an information-theoretic approach to describe changes in lending relationships between financial institutions around the time of the Lehman Brothers failure. Unlike previous work that conducts maximum likelihood estimation on undirected networks our analysis distinguishes between...

In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the liquidity coverage ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to survive a 30-day period of...