Despite the "interest rate turnaround" initiated by the ECB in the second half of 2022 as a late reaction to the clearly underestimated persistence of high inflation rates in the euro area, real interest rates are by no means to be regarded as restrictive, neither in the ex post nor in the ex...

Dieser Beitrag untersucht Liquiditätseffekte einer Vermögensteuer bei Mietwohnimmobilien. Mithilfe von Daten einer Immobilien-Kapitalgesellschaft werden die Wirkungen einer Vermögensteuer auf die Cashflows aus der Vermietung von Wohnimmobilien simuliert. Der Detailgrad der Daten ermöglicht...

How does a shock to the liquidity of bank assets affect credit supply, cross-border lending, and real activity at the firm level? We exploit that, in 2007, the European Central Bank replaced national collateral frameworks by a single list. This collateral framework shock added loans to...

Theory offers two diverging views on the effects of ex-ante litigation risk on corporate liquidity proxied by cash holdings. Ex-ante litigation risk, however, is difficult to measure. We test the liquidity effects of ex-ante litigation risk exploiting the phase-by-phase introduction of...

This paper investigates the impact of the liquidity shock on the export revenue of firms. Using the natural experiment, brought by the reform to the Colombian short-term financing legislation in 2011, we study how the liquidity constraints have impacted Colombian exporters. Our sample includes...

UK government bond yields rise significantly in a two-day window before Monetary Policy Committee (MPC) meetings, with the majority of this yield drift attributed to increases in risk premia. These effects concentrate in pre-MPC windows that coincide with issuance of UK government bonds....

In light of the recent state of global financial markets, the practice of short selling has come under increasing scrutiny. While financial institutions argue that short selling is a necessary mechanism for price discovery and contributes significantly to market liquidity, regulators view it as...

This paper presents new empirical evidence to support the hypothesis that positive money supply shocks drive short-term interest rates down. We then present a quantitative, general equilibrium model which is consistent with the hypothesis. The two key features of our model are that (i) money...

This study documents that asset purchase programs can dampen market liquidity. It uses a unique dataset of global euro-denominated covered bonds, which quantitative easing has affected to a larger extent than other markets. While the start of the central bank purchases amplifies liquidity for...

I examine the impact of the Federal Reserve's balance sheet reduction on short-term interest rates emanating from the declining supply of reserve balances. Using an exogenous shift in the supply of reserves, I estimate that by January 2019, when the Fed will have reduced its portfolio by $500...

We investigate the liquidity effects of the short sale bans enacted by six European countries in March 2020 in response to the declining market brought about by the onset of the Covid-19 pandemic. Comparing stocks subjected to these bans to those in other European countries that did not...

We show that popular models of flight-to-liquidity shocks have strongly counterfactual implicationsfor asset returns and the composition of firms' liabilities, including the return spread between bankdeposits and T-bills and the share of bank loans on corporate debt. Further, the implied...

We evaluate whether the adoption of performance commitment clauses in M&A deals affects the corporate liquidity of acquirers. Using a sample of Chinese M&A deals from 2007 to 2020, we find that firms signing performance commitment clauses in acquisitions are associated with lower liquidity,...

Recent turmoil in financial markets endorses the need for rigorous handling and integration of asset liquidity risk into Value-at-Risk (VaR) models. In this work we develop and test measures of certain kinds of asset liquidity risk that is useful for completing the definition of market risk and...

Several recent papers provide strong empirical support for the view that an expansionary monetary policy disturbance generates a persistent decrease in interest rates and a persistent increase in output and employment. Existing quantitative general equilibrium models, which allow for capital...

Conventional wisdom holds that unanticipated expansionary monetary policy shocks cause transient but persistent decreases in real and nominal interest rates. However a number of econometric studies argue that the evidence favors the opposite view, namely that these shocks actually raise, rather...

We decompose mutual fund flow–driven price pressure into liquidity and information components by measuring the extent to which mutual fund flow-driven trading spills over from the United States (US) to 44 international markets. Our procedure shows that liquidity barriers are greater than...

Money demand and the stock of money have all but disappeared from monetary policy analyses. This paper is an empirical contribution to the debate over the role of money in monetary policy analysis. The paper models supply and demand interactions in the money market and finds evidence of an...

The overnight interest rate is the price paid for one day loans and defines the short end of the yield curve. It is the equilibrium outcome of supply and demand for bank reserves. This paper models the intertemporal decision problems in the reserve market for both central and commercial banks....

We model the interbank market for overnight credit with heterogeneous banks and asymmetric information. An unsophisticated bank just trades to compensate its liquidity imbalance, while a sophisticated bank will exploit its private information about the liquidity situation in the market. It is...

We analyze the behaviour of the realized volatility (RV) estimator under liquidity effects. The liquidity is measured by the impact of the trading volume on the asset price. We find that this estimator is inconsistent but convergent in probability. Motivated by this fact, we propose a new...

This paper studies the role of moral hazard and liquidity in driving household bankruptcy. First, I estimate that increases in potential debt forgiveness have a positive, but small, effect on filing using a regression kink design. Second, exploiting quasi-experimental variation in mortgage...

Do stock prices of publicly listed companies respond to changes in transaction costs? Using the SEC's pilot program that increased the tick size for approximately 1,200 randomly chosen stocks, we find a stock price decrease between 1.75% and 3.2% for small spread stocks affected by the larger...

We use the Short Interest strategy – buying low short interest stocks and shorting high short interest stocks – as a “barometer” for liquidity shocks impacting sophisticated equity investors: we explain why the strategy should exhibit V-shaped draw-downs when short-sellers are affected...

Canada's Large Value Transfer System (LVTS) is in the process of being replaced by a real-time gross settlement (RTGS) system. A pure RTGS system typically requires participants to hold large amounts of intraday liquidity in order to settle their payment obligations. Implementing one or more...

We estimate the welfare costs of inflation originating from lack of liquidity satiation - as in Bailey (1956), Friedman (1969), Lucas (2000), and Ireland (2009) - for the U.S., U.K., Canada, and three countries/economic areas (Switzerland, Sweden, and the Euro area) in which interest rates have...

This paper addresses the question of whether transaction costs affect stock prices. This question, in the intersection of market microstructure and asset pricing, has no supportive causal evidence to this date, which may explain the omission of transaction costs in mainstream asset pricing...

China's growing importance to the Australian economy has been well recognized in policy circles but remained relatively untested in formal empirical analysis. This paper examines the reactions of Australian macroeconomic variables to Chinese money growth and inflation over the post-2002 period...

We study how the risks to future liquidity flow across corporate bond, Treasury, and stock markets. We document distribution “flight-to-safety” effects: a deterioration in the liquidity of high-yield corporate bonds forecasts an increase in the average liquidity of Treasury securities and a...

This study explores the effects of state-imposed local tax and expenditure limits or TELs on the budgetary solvency of city governments in the US. Most local TELs were enacted in the late 1970s and early 1980s, and have remained largely unchanged in the last three to four decades. These...

While Over-The-Counter (OTC) markets have widely been studied for equity and interest-rate products, there is only scarce literature on OTC derivative equity markets. In this paper we use use Market Data for regular Eurex Options and OTC-Blocktrades to study differences for OTC and regular...