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We formulate the “High Liquidity Creation Hypothesis” (HLCH) that a proliferation in the core activity of bank … liquidity creation increases failure probability. We test the HLCH in the context of Russian banking, which provides a natural … field experiment due to numerous failures experienced over the past decade. Using Berger and Bouwman’s (2009) liquidity …
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We consider the optimality of various institutional arrangements for agencies that conduct macro-prudential regulation and monetary policy. When a central bank is in charge of price and financial stability, a new time inconsistency problem may arise. Ex-ante, the central bank chooses the...
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