question, focusing on liquidity constraints and uninsurable idiosyncratic risk. We consider a search model where agents use … reserves and the response of the economy tends to be larger. In this case, agents expect to be liquidity constrained and, due …

allows banks in different regions to smooth local liquidity shocks by borrowing and lending on a world interbank market. We … show under which conditions financial integration induces banks to reduce their liquidity holdings and to shift their … portfolios towards more profitable but less liquid investments. Integration helps reallocate liquidity when different banks are …