Systemic illiquidity in the interbank network
Sam Langfield (),
Tomohiro Ota and
Gerardo Ferrara ()
No 86, ESRB Working Paper Series from European Systemic Risk Board
We study systemic illiquidity using a unique dataset on banks’ daily cash flows, short-term interbank funding and liquid asset buffers. Failure to roll-over short-term funding or repay obligations when they fall due generates an externality in the form of systemic illiquidity. We simulate a model in which systemic illiquidity propagates in the interbank funding network over multiple days. In this setting, systemic illiquidity is minimised by a macroprudential policy that skews the distribution of liquid assets towards banks that are important in the network. JEL Classification: D85, E44, E58, G28
Keywords: liquidity regulation; macroprudential policy; systemic risk (search for similar items in EconPapers)
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Journal Article: Systemic illiquidity in the interbank network (2019)
Working Paper: Systemic illiquidity in the interbank network (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:201886
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