-sheet characteristics, such as its leverage, the maturity structure of its debt, and the liquidity and riskiness of its asset portfolio …. They also show how the framework can be applied to examine current policy issues, including liquidity requirements …

Banks hold liquid and illiquid assets. An illiquid bank that receives a liquidity shock sells assets to liquid banks in … the market equilibrium is constrained inefficient, with too little liquidity and inefficient hoarding. Our model features … a precautionary as well as a speculative motive for hoarding liquidity, but the inefficiency of liquidity provision can …

cases, a deposit contract, even with liquidity support from the central bank, cannot achieve the first best efficient …

but the total amount of available liquidity within the surviving banks falls. This results in 'cash-in-the-market' pricing … level of asset prices, there are too many banks to liquidate and inefficient users of assets who are liquidity-endowed may … regulator to bail out some failed banks. We show however that there exists a policy that involves liquidity assistance to …