Outside and Inside Liquidity
We propose an origination-and-contingent-distribution model of banking, in which liquidity demand by short-term investors (banks) can be met with cash reserves (inside liquidity) or sales of assets (outside liquidity) to long-term investors (hedge funds and pension funds). Outside liquidity is a more efficient source, but asymmetric information about asset quality can introduce a friction in the form of excessively early asset trading in anticipation of a liquidity shock, excessively high cash reserves, and too little origination of assets by banks. The model captures key elements of the financial crisis and yields novel policy prescriptions. Copyright 2011, Oxford University Press.
Year of publication: |
2011
|
---|---|
Authors: | Bolton, Patrick ; Santos, Tano ; Scheinkman, Jose A. |
Published in: |
The Quarterly Journal of Economics. - Oxford University Press, ISSN 1531-4650. - Vol. 126.2011, 1, p. 259-321
|
Publisher: |
Oxford University Press |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Cream skimming in financial markets
Bolton, Patrick, (2011)
-
Bolton, Patrick, (2009)
-
Cream-skimming in financial markets
Bolton, Patrick, (2016)
- More ...