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PubMed Central
Other literature type . 2020
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Journal of Economic Dynamics and Control
Article . 2020 . Peer-reviewed
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zbMATH Open
Article . 2020
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SSRN Electronic Journal
Article . 2015 . Peer-reviewed
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EconStor
Research . 2015
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Liquidity Backstops and Dynamic Debt Runs

Liquidity backstops and dynamic debt runs
Authors: Bin Wei; Vivian Z. Yue;

Liquidity Backstops and Dynamic Debt Runs

Abstract

Liquidity backstops can mitigate runs. In this paper we develop a dynamic model of debt runs based on He and Xiong (2012) to identify, both conceptually and quantitatively, the value of a liquidity backstop for its run-mitigating role. For the purpose of identification, we focus on the municipal bond markets for variable rate demand obligations and auction rate securities. Based on the run episodes in these markets during the financial crisis of 2007-09 and the calibrated model, we find that the value of a liquidity backstop is about 14.5 basis points per annum. Our findings have important policy implications regarding the effectiveness of liquidity backstops in ameliorating problems of financial instability.

Country
Colombia
Keywords

Liquidity backstop, Debt runLender of last resort, SARS-CoV-2, ddc:330, COVID-19, debt run, Article, Coronavirus, Síndrome respiratorio agudo grave, Derivative securities (option pricing, hedging, etc.), lender of last resort, Macroeconomic theory (monetary models, models of taxation), G20, G10, G21, liquidity backstop

  • BIP!
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    selected citations
    These citations are derived from selected sources.
    This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    6
    popularity
    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
    Top 10%
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    Average
    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
    Average
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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
6
Top 10%
Average
Average
Green
bronze