We develop a model in which financial intermediaries hold liquidity to protect themselves from shocks. Depending on … parameter values, banks may choose to hold too much or too little liquidity on aggregate compared with the socially optimal … underinsurance against liquidity choice. The model therefore provides a unified framework for thinking, on the one hand, about policy …

provide liquidity at a very high rate of interest. However, most of the theoretical literature on liquidity provision suggests … reserves available is limited. A high price for this liquidity allows banks that need it most to self-select. To the contrary …. -- liquidity provision ; lender of last resort ; Bagehot ; commodity money …

This paper explores liquidity spillovers in market-capitalization-based portfolios of NYSE stocks. Return, volatility …, and liquidity dynamics across the small- and large-cap sectors are modeled by way of a vector autoregression model, using … data that spans more than 3,000 trading days. We find that volatility and liquidity innovations in one sector are …

more highly correlated; moreover, at these times, money supply positively affects financial market liquidity, albeit with a … lag of two weeks. During normal times, increases in mutual fund flows enhance stock market liquidity and trading volume …, but during financial crises, U.S. government bond funds see higher inflows, resulting in increased bond market liquidity …

This paper explores liquidity movements in stock and Treasury bond markets over a period of more than 1800 trading days …. Cross-market dynamics in liquidity are documented by estimating a vector autoregressive model for liquidity (that is, bid … in one market affects the spreads in both markets, and that return volatility is an important driver of liquidity …

The most recent global financial crisis, characterized as a liquidity crunch, began in the U.S. in late 2007 and … quickly spread to other countries. The rapid propagation of the liquidity shock and the severe effects of the crisis on stock … market performance have raised several important questions. Which channels contributed to the transmission of liquidity …

Following previous research which established that liquidity commonality exists within one stock market over a short … period of time, this paper finds that liquidity commonality also exists globally. Utilising a large number of stock exchanges … and a twelve year research time frame, this paper observes that liquidity commonality exists in both developed and …

Dealers, who strategically supply liquidity to traders, are subject to both liquidity and adverse selection costs …. While liquidity costs can be mitigated through inter-dealer trading, individual dealers' private motives to acquire … information compromise inter-dealer market liquidity. Post-trade information disclosure can improve market liquidity by …