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How should monetary policy respond to changes in financial conditions? In this paper we consider a simple model where firms are subject to idiosyncratic shocks which may force them to default on their debt. Firms' assets and liabilities are denominated in nominal terms and predetermined when...
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financial crisis, in which liquidity shocks become more erratic and the total costs of defaults increase, central banks may want …
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' funding liquidity and solvency. Both asset liquidity and central bank haircuts are modelled as power functions within the unit … interval. Funding stability is captured as strategic bank run game in pure strategies between depositors. Asset liquidity, the … bank collateral and why a sudden non-anticipated reduction of asset liquidity, or a tightening of the collateral framework …
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We analyse the impact of the Liquidity Coverage Ratio (LCR) on the demand for central bank reserves in the euro area … crisis and the associated introduction of new liquidity regulation …
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