The paper studies the central bank collateral framework and its impact on banks’ liquidity under an adverse stress test scenario. We construct a stress test model that accounts for a granular and multi-faceted representation of the liquidity of marketable and non-marketable assets. In...

We investigate the effects that mutual fund liquidity requirements have on fragility. Starting in 2018, SEC Rule 22e-4 restricted ownership of illiquid securities in funds. As expected, post-rule, funds hold more liquid securities. Firms issuing illiquid securities face higher costs due to a...

When the Federal Reserve (Fed) expanded its balance sheet via quantitative easing (QE), commercial banks financed reserve holdings with deposits and reduced their average maturity. They also issued lines of credit to corporations. However, when the Fed halted its balance-sheet expansion in 2014...

We build models with an interest-bearing central bank digital currency (CBDC) to investigate whether the interest-bearing CBDC can lead to financial disintermediation. Our model of CBDC and banking captures a key feature of an intermediated CBDC system that idle CBDC can be converted into...

Obtaining a good understanding of the determinants of liquidity of licensed banks is important to make rational policy decisions on time in order to achieve one of the prime objectives of stability of the financial system of Central Bank of Sri Lanka. Hence, the main objective of this study is...

The excess liquidity in the euro area is a product of a long period of quantitative easing. It changed the operational framework of the European Central Bank (ECB)’s monetary policy from the scarce reserves system (SRS) to the abundant reserves system (ARS). To eliminate excess liquidity and...