Liquidity Hoarding and Inefficient Abundant Funding
Journal: International Journal of Central Banking,volume 11,issue 3 June,pages303-327
jel: jel:D53 | jel:D86 | jel:D82
This paper studies banks’ choice between building liquidity buffers and raising funding ex post to deal with reinvestment shocks. We uncover the possibility of an inefficient liquidity squeeze equilibrium when ex post funding is abundant. In the model, banks typically b... View more
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