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 …

We examine banking regulation in a macroeconomic model of bank runs. We construct a general equilibrium model where …

Because of secrecy, little is known about the political economy of central bank lending. Utilizing a novel, hand … November 1930, the Banque de France (BdF) lent selectively rather than broadly, providing substantially more liquidity to … unprecedented government bailout of the central bank, and resulted in loss of shareholder control over the central bank …

facing each individual bank. We find that regulatory-induced competition reduced liquidity creation. Consistent with some …Does an intensification of competition among banks increase or decrease liquidity creation? By integrating the dynamic … process of interstate bank deregulation that lowered barriers to competition across U.S. states over the 1980s and 1990s with …

We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some … depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to … survive a run. The incomplete information means that the bank is not automatically incentivized to always hold enough liquid …

's prediction that small firms may be unable to access liquidity when large shocks arrive using data on drawdowns in the COVID … recession. Consistent with the theory, the increase in bank credit in 2020Q1 and 2020Q2 came almost entirely from drawdowns by … large firms on pre-committed lines of credit. Differences in demand for liquidity cannot fully explain the differences in …

Banks are unique among financial institutions because they are the cheapest source of liquidity in the economy. Banks … market substitutes for bank liabilities do not escape from the cost of reserves since their issuers lean on banks to provide … liquidity. Since the cost of reserves falls on all issuers of less liquid liabilities seeking access to payment services …

firms from bank liquidity shocks …In 2011, Colombia instituted a tax on repayment of bank loans, thereby increasing the cost of short-term bank credit … more than long-term credit. Firms responded by cutting their short-term loans for liquidity management purposes and …

simple model where, even ignoring interconnectedness issues, the failure of a bank causes a larger welfare loss than the … failure of other institutions. The reason is that agents in need of liquidity tend to concentrate their holdings in banks …. Thus, a shock to banks disproportionately affects the agents who need liquidity the most, reducing aggregate demand and the …