This article assesses the extent to which government-administered financial shocks and lower interest rates can account for the massive accumulation of bank excess reserves in the Great Depression. Both factors are shown to be statistically significant. Financial shocks did exert astatistically...

Global banks played a significant role in the transmission of the 2007 to 2009 crisis to emerging market economies. We examine the relationships between adverse liquidity shocks on main developed-country banking systems to emerging markets across Europe, Asia, and Latin America, isolating loan...

What is the effect of financial crises and their resolution on banks' choice of liquid asset holdings? When risky assets have limited pledgeability and banks have relative expertise in employing risky assets, the market for these assets clears only at fire-sale prices following a large number of...

Using the September 15, 2008 bankruptcy of Lehman Brothers as an exogenous shock to funding costs, we show that hedge funds act as liquidity providers. Hedge funds using Lehman as prime broker could not trade after the bankruptcy, and these funds failed twice as often as otherwise-similar funds...

When "confidence" is lost, "liquidity dries up." We investigate the meaning of "confidence" and "liquidity" in the context of the current financial crisis. The financial crisis is a manifestation of an age-old problem with private money creation, banking panics. We explain this and provide some...

How did the Subprime Crisis, a problem in a small corner of U.S. financial markets, affect the entire global banking system? To shed light on this question we use principal components analysis to identify common factors in the movement of banks' credit default swap spreads. We find that fortunes...

This paper discusses the role for a lender of last resort (LLR) in preventing banking panics (section I) , then briefly considers classical and more recent concepts of the LLR (section II). Section III examines historical evidence for the U.S. and other countries on the incidence of banking...

Since 2008, the central banks of advanced countries have borrowed trillions of dollars from their commercial banks in the form of interest-paying reserves and invested the proceeds in portfolios of risky assets. We investigate how this new style of central banking affects central banks'...

The recent crisis highlighted the importance of globally active banks in linking markets. One channel for this linkage is through how these banks manage liquidity across their entire banking organization. We document that funds regularly flow between parent banks and their affiliates in diverse...