Liquidity Funding Shocks: The Role of Banks' Funding Mix

Antonio Alvarez, Alejandro Fernandez, Joaquin Garcia-Cabo and Diana Posada
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Joaquin Garcia-Cabo: https://www.federalreserve.gov/econres/joaquin-garcia-cabo.htm

No 1245, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This study attempts to evaluate the impact of an increase in banks' funding stress and its transmission to the real economy, taking into account different funding sources banks can rely on. Using aggregate data from eight Euro area financial systems, we find that following a liquidity funding shock, both credit and GDP decline in different amounts and lengths. GDP reverts faster than credit. Furthermore, periphery countries experience a more pronounced fall in deposits and credit growth and the negative effects from the shock last longer than in core countries. Banks' funding seems to play a relevant role as periphery countries rely more on wholesale funding during normal times.

Keywords: Liquidity funding shocks; ECB policy; Euro Area (search for similar items in EconPapers)
JEL-codes: E50 E58 F45 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2019-04-22
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-fdg, nep-mac and nep-mon
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https://www.federalreserve.gov/econres/ifdp/files/ifdp1245.pdf (application/pdf)

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Journal Article: Liquidity Funding Shocks: the Role of Banks’ Funding Mix (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1245

DOI: 10.17016/IFDP.2019.1245

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