TY  - UNPD
A1  - Cao, Jin
A1  - Illing, Gerhard
T1  - Endogenous systemic liquidity risk
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2008,23
N2  - Traditionally, aggregate liquidity shocks are modelled as exogenous events. Extending our previous work (Cao & Illing, 2007), this paper analyses the adequate policy response to endogenous systemic liquidity risk. We analyse the feedback between lender of last resort policy and incentives of private banks, determining the aggregate amount of liquidity available. We show that imposing minimum liquidity standards for banks ex ante are a crucial requirement for sensible lender of last resort policy. In addition, we analyse the impact of equity requirements and narrow banking, in the sense that banks are required to hold sufficient liquid funds so as to pay out in all contingencies. We show that such a policy is strictly inferior to imposing minimum liquidity standards ex ante combined with lender of last resort policy.
T3  - CFS working paper series - 2008, 23 
KW  - Liquidity Risk
KW  - Free-Riding
KW  - Narrow Banking
KW  - Lender of Last Resort
KW  - Liquidität
Y1  - 2008
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/5748
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-56969
N1  - First Version: April 2008 ; This Version: July 2008
IS  - This Version: July 2008
ER  -