On the instability of private intertemporal liquidity provision

Diemo Dietrich and Thomas Gehrig

Economics Letters, 2021, vol. 209, issue C

Abstract: The provision of intertemporal liquidity by banks is known to be subject to coordination failures. We establish that asset markets providing intertemporal liquidity are also inherently unstable. These findings challenge the notion of an optimal private provision of liquidity.

Keywords: Liquidity insurance; Instability; Overlapping generations; Market incompleteness (search for similar items in EconPapers)
JEL-codes: D15 D52 E22 G21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Working Paper: On the Instability of Private Intertemporal Liquidity Provision (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:209:y:2021:i:c:s0165176521003943

DOI: 10.1016/j.econlet.2021.110117

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