This paper studies the choice between building liquidity buffers and raising funding ex post, to deal with liquidity … shocks. We uncover the possibility of an inefficient liquidity squeeze equilibrium. Agents typically choose to build smaller … liquidity buffers when they expect cheap funding. However, when agents hold smaller liquidity buffers, they can raise less …

We examine the liquidity effects of the euro area sovereign debt crisis, including its effects on euro area banks as a … group, on intra-euro area financial flows, on the supply of and demand for collateral, and on international liquidity. The … deficit countries and its collateral policy. The euro crisis has also created international liquidity stresses. We find that …