We employ a proprietary transaction-level dataset in Germany to examine how capital requirements affect the liquidity … gap - aggregate liquidity declines. Our results are stronger for banks with a higher capital shortfall, for non …

This paper proposes a positive theory of the link between banks’ capitalisation and their liquidity-risk taking as well … as the severity of fire-sale problems and liquidity crises. In the basic framework of an individual bank’s decisions, we … find that banks’ incentives to hold liquidity for precautionary reason are increasing with their capital. In a continuum …

Different aspects of liquidity impact the performance of short-run reversals in different ways, consistent with the …