On the Instability of Private Intertemporal Liquidity Provision

Thomas Gehrig and Diemo Dietrich

No 16528, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We establish that the provision of intertemporal liquidity is fundamentally prone to instability. Not only are banks subject to coordination failures but also asset markets are inherently unstable. These findings challenge the notion of optimal private provision of liquidity.

Keywords: Liquidity provision; Instability; Incomplete markets (search for similar items in EconPapers)
JEL-codes: D15 D52 E22 G21 (search for similar items in EconPapers)
Date: 2021-09
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Journal Article: On the instability of private intertemporal liquidity provision (2021)
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