 Systemic liquidity shortages and interbank network structuresSeung Hwan Lee Journal of Financial Stability, 2013, vol. 9, issue 1, 1-12 Abstract: This paper aims to shed light on the systemic nature of liquidity risk and to propose a method for calculating systemic liquidity shortages. Our method incorporates not only direct liquidity shortages but also indirect liquidity shortages due to the knock-on effects through interbank linkages. We perform a simulation with a simple banking system model and find that a deficit bank can mitigate a liquidity shortage by holding more claims on a surplus bank. Meanwhile, a greater imbalance in liquidity positions across banks tends to aggravate the liquidity shortage of a deficit bank. According to comparative analysis between different types of network structures, a core-periphery network with a deficit money center bank gives rise to the highest level of systemic liquidity shortage, and a banking system becomes more vulnerable to liquidity shocks as its interbank network becomes more ill-matched. Keywords: Liquidity shortage; Interbank network; Systemic risk; Knock-on effect (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:9:y:2013:i:1:p:1-12 DOI: 10.1016/j.jfs.2012.12.001 Access Statistics for this article Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman More articles in Journal of Financial Stability from Elsevier |
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