Liquidity risk, market power and the informational effects of policy

Grégory Claeys, Katerina Chara Papioti and Andreas Tryphonides

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Abstract: Using a structural approach, we combine bidding data from open market operations with macroeconomic information to recover the latent distribution of liquidity risk across financial institutions in Chile and how it is affected by policy. We find that unanticipated shocks to foreign reserve accumulation and interest rates have significant effects on aggregate beliefs about a liquidity shock in the near future. We demonstrate that accounting for market power is important for measuring the strength of this informational channel of macroeconomic policy.

Keywords: Multi-unit auction; Liquidity risk; Signalling effects of macroeconomic policy (search for similar items in EconPapers)
Date: 2023-05
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Published in Journal of International Economics, 2023, 142, pp.1-35. ⟨10.1016/j.jinteco.2023.103732⟩

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Related works:
Journal Article: Liquidity risk, market power and the informational effects of policy (2023)
Working Paper: Liquidity Risk, Market Power and the Informational Effects of Policy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04164592

DOI: 10.1016/j.jinteco.2023.103732

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