Three Liquidity Crises in Retrospective: Implications for Central Banking Today

Stephan Sauer

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: Liquidity problems lie at the heart of crises on financial markets as demonstrated in this paper by detailed descriptions of the stock market crash in 1987, the LTCM-crisis in 1998 and the financial market consequences of 11 September 2001. The events also demonstrate that modern central banks, in particular the U.S. Federal Reserve under Alan Greenspan, provided emergency liquidity to limit the negative effects of such crises. However, the anecdotal and empirical evidence from the three crises shows that such emergency liquidity assistance implies risks to goods price stability if it is not focused on the interbank market and quickly sterilised.

Keywords: Liquidity Crises; Financial Stability; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E44 E58 G10 (search for similar items in EconPapers)
Date: 2007-08
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:2011

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