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Liquidity Risk, Liquidity Creation and Financial Fragility : A Theory of Banking
Diamond, Douglas W. - 1999
Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about … when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they … compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise …
Persistent link: https://www.econbiz.de/10012471328
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Let the Worst One Fail : A Credible Solution to the Too-Big-To-Fail Conundrum
Philippon, Thomas; Wang, Olivier - National Bureau of Economic Research - 2021
We study time-consistent bank resolution mechanisms. When interventions are ex post efficient, a government cannot commit not to inject capital into the banking system. Contrary to common wisdom, we show that the government may still avoid moral hazard and implement the first best allocation by...
Persistent link: https://www.econbiz.de/10012794588
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Bank Runs : Liquidity and Incentives
Cooper, Russell - 1991
Diamond-Dybvig [1983] provide a model of intermediation in which bank runs are driven by pessimistic depositor expectations. Models which address these issues are important in the ongoing discussion which weighs the costs (incentive problems) and the benefits (preventing runs) of deposit...
Persistent link: https://www.econbiz.de/10012475067
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Can Emerging Market Bank Regulators Establish Credible Discipline? The Case of Argentina, 1992-1999
Calomiris, Charles W. - 2000
In the early 1990s, after decades of high inflation and financial repression, Argentina embarked on a course of macroeconomic and bank regulatory reform. Bank regulatory policy promoted privatization, financial liberalization, and free entry, limited safety net support, and established a novel...
Persistent link: https://www.econbiz.de/10012471046
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Liquidity Requirements, Liquidity Choice and Financial Stability
Diamond, Douglas W. - 2016
assets to survive runs. Regulation similar to the liquidity coverage ratio and the net stable funding ratio (that are soon be …
Persistent link: https://www.econbiz.de/10012456621
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Deposit Insurance and Orderly Liquidation without Commitment : Can we Sleep Well?
Cooper, Russell - 2013
This paper assess the affects of the orderly liquidation of a failing bank and the ex post provision of deposit insurance on the prospect of bank runs. Assuming that the public institutions in charge of these policies lack commitment power, these interventions, both individually and jointly, are...
Persistent link: https://www.econbiz.de/10012459530
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Measuring Liquidity Mismatch in the Banking Sector
Krishnamurthy, Arvind - 2016
This paper implements a liquidity measure, "Liquidity Mismatch Index (LMI)," to gauge the mismatch between the market … liquidity of assets and the funding liquidity of liabilities. We construct the LMIs for 2882 bank holding companies during 2002 …-2014 and investigate the time-series and cross-sectional patterns of banks' liquidity and liquidity risk. Aggregate banking …
Persistent link: https://www.econbiz.de/10012455951
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A Behavioral Model of Demandable Deposits and its Implications for Financial Regulation
Rotemberg, Julio J. - 2010
A model is developed which rationalizes contracts that give depositors the right to obtain funds on demand even when depositors intend to use these funds for consumption in the future. This is explained by depositor overoptimism regarding their own ability to collect funds in a run. Capitalized...
Persistent link: https://www.econbiz.de/10012462037
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Capital Requirements in a Quantitative Model of Banking Industry Dynamics
Corbae, Dean - 2019
We develop a model of banking industry dynamics to study the quantitative impact of capital requirements on equilibrium bank risk taking, commercial bank failure, interest rates on loans, and market structure. We propose a market structure where big banks with market power interact with small,...
Persistent link: https://www.econbiz.de/10012479380
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Financial Safety Nets
Bengui, Julien - 2016
optimal to restrict ex ante the set of investors that can receive public liquidity support ex post. When the government can …
Persistent link: https://www.econbiz.de/10012456085