Can banks maintain their advantage as liquidity providers when they are heavily exposed to a financial crisis? The … liquidity insurer is not one of the passive recipient, but of an active seeker, of deposits. We find that banks facing a funding … liquidity demand shocks (as measured by their unused commitments, wholesale funding dependence, and limited liquid assets), as …

We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities and ask: Can a … shock to the liquidity of private paper lead to a collapse in short-term nominal interest rates and a recession like the one … interventions in which the government provides liquidity in exchange for illiquid private paper? We find that the effects of the …