’ funding structures jointly with that in their excess liquidity holdings. We find evidence that banks highly exposed to the …, importantly, the explicit consideration of the role of excess liquidity in our analysis. …

We study how banks manage their liquidity among the various assets at their disposal. We exploit the introduction of … assets over time. Our results imply that frictions in one market for liquidity can spill over to several markets. …

a liquidity trap? To provide an answer, we employ a small stochastic New Keynesian model with a zero bound on nominal …-term nominal interest rate and debt-financed government spending. The optimal policy response to a liquidity trap critically … sector expectations that helps to dampen the fall in output and inflation at the outset of the liquidity trap. …