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The Federal Funds Market, Pre- and Post-2008
Swanson, Eric T. - National Bureau of Economic Research - 2022
This chapter provides an overview of the federal funds market and how the equilibrium federal fund rate is determined. I devote particular attention to comparing and contrasting the federal funds market before and after 2008, since there were several dramatic changes around that time that...
Persistent link: https://www.econbiz.de/10012938731
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Collective Moral Hazard and the Interbank Market
Altinoglu, Levent; Stiglitz, Joseph E. - National Bureau of Economic Research - 2022
The concentration of risk within the financial system leads to systemic instability. We propose a theory to explain the structure of the financial system and show how it alters the risk taking incentives of financial institutions when the government optimally intervenes during crises. By issuing...
Persistent link: https://www.econbiz.de/10012938776
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Interest Received by Banks during the Financial Crisis : LIBOR vs Hypothetical SOFR Loans
Jermann, Urban J. - National Bureau of Economic Research - 2021
The credit sensitivity of LIBOR helped lenders during the financial crisis. SOFR is not credit-sensitive and would not have provided that support. The cumulative additional interest from LIBOR during the crisis is estimated to be between 1% to 2% of the notional amount of outstanding loans,...
Persistent link: https://www.econbiz.de/10012794641
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Interbank Connections, Contagion and Bank Distress in the Great Depression
Calomiris, Charles W. - 2019
Liquidity shocks transmitted through interbank connections contributed to bank distress during the Great Depression … network liquidity risk, suggesting that banks expected the Fed to reduce that risk. Because the Fed's presence removed the … incentives for the most systemically important banks to maintain capital and cash buffers that had protected against liquidity …
Persistent link: https://www.econbiz.de/10012479846
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Bank Funding Risk, Reference Rates, and Credit Supply
Cooperman, Harry; Duffie, Darrell; Luck, Stephan; Wang, … - National Bureau of Economic Research - 2023
Corporate credit lines are drawn more heavily when funding markets are more stressed. This covariance elevates expected bank funding costs. We show that credit supply is dampened by the associated debt-overhang cost to bank shareholders. Until 2022, this impact was reduced by linking the...
Persistent link: https://www.econbiz.de/10014226104
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Interbank Networks and the Interregional Transmission of Financial Crises : Evidence from the Panic of 1907
Jaremski, Matthew S.; Wheelock, David C. - National Bureau of Economic Research - 2023
This paper provides quantitative evidence on interbank transmission of financial distress in the Panic of 1907 and ensuing recession. Originating in New York City, the panic led to payment suspensions and emergency currency issuance in many cities. Data on the universe of interbank connections...
Persistent link: https://www.econbiz.de/10014287370
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Can Output Losses Following International Financial Crises be Avoided?
Dooley, Michael P. - 2000
Recent financial crises in emerging markets have been followed by temporary but substantial losses in output. This paper explores the possibility that threats of such losses are the dominant incentive for repayment of international debt. In this environment private debtors and creditors have...
Persistent link: https://www.econbiz.de/10012471243
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Capital Movements, Banking Insolvency, and Silent Runs in the Asian Financial Crisis
Kane, Edward J. - 2000
This paper supplies an agency-cost and contestable-markets perspective on the financial policies that triggered the Asian financial crisis. The agency-cost analysis hypothesizes that individual-country regulators knew that politically directed loans had made their banks insolvent, but...
Persistent link: https://www.econbiz.de/10012471262
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Liquidity Risk, Liquidity Creation and Financial Fragility : A Theory of Banking
Diamond, Douglas W. - 1999
Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about … when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they … compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise …
Persistent link: https://www.econbiz.de/10012471328
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Liquidity Crises in Emerging Markets : Theory and Policy
Chang, Roberto - 1999
We build a model of financial sector illiquidity in an open economy. Illiquidity defined as a situation in which a country's consolidated financial system has potential short-term obligations in foreign currency that exceed the amount of foreign currency it can have access to on short notice can...
Persistent link: https://www.econbiz.de/10012471518