A preferred habitat for liquidity in term repos: Before, during and after the financial crisis

Ahmed Baig and Drew B. Winters

Journal of Economics and Business, 2018, vol. 99, issue C, 14 pages

Abstract: The money market rates in the United States have exhibited a year-end effect consistent with the preferred habitat for liquidity. We revisit the year-end preferred habitat for liquidity using data on government general collateral repurchase agreements (GC Repos). We find no evidence to suggest a year-end effect during the financial crisis. The result is consistent with liquidity hoarding by investors during a crisis characterized by liquidity and solvency issues. Additionally, our findings suggest that investors manage their year-end liquidity following the crisis even when interest rates are historically low.

Keywords: Financial crisis; Year-end effect; Preferred habitat; Repurchase agreements (search for similar items in EconPapers)
JEL-codes: E50 G01 G10 G23 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:99:y:2018:i:c:p:1-14

DOI: 10.1016/j.jeconbus.2018.07.002

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