Bech, Morten; Keister, Todd - Bank for International Settlements (BIS) - 2014
We study the effects of the new Basel III liquidity regulations in jurisdictions with a limited supply of high …-quality liquid assets. Using a model based on Bech and Keister (2013), we show how introducing a liquidity coverage ratio in such … settings can have significant side effects, leading to a large liquidity premium and pushing the short-term interest rate to …