bank's concern about the cost of financial disruption generates an asymmetric response, thus contributing to the creation … of an asset price bubble. In an economy with a highly leveraged financial structure, the central bank has an incentive to … a central bank to inject liquidity in a crisis. …

intermediaries' incentives for liquidity transformation are affected by the central bank's reaction to financial crisis. Anticipating … central bank's reaction to liquidity stress gives banks incentives to invest in excessive liquidity transformation, triggering …

In this paper we present a three period setup to model central bank forward guidance in a liquidity trap. We analyze …