Banks' liquidity is a crucial determinant of the adversity of banking crises. In this paper, we consider the effect of fire sales and entry during crises on banks’ ex-ante choice of liquid asset holdings. We consider a setting with limited pledgeability of risky cash flows relative to safe...

"This paper presents a theory to link improvements in transparency about monetary policy objectives to improvements in transparency about monetary policy actions and then to the conditional volatility of market expectations of policy rates. Crucially, policy announcements act not just as an...

The ECB’s Outright Monetary Transactions (OMT) program, launched in summer 2012, indirectly recapitalized periphery country banks through its positive impact on the value of sovereign bonds. However, the regained stability of the European banking sector has not fully transferred into economic...

We examine the financial conditions of dealers that participated in two of the Federal Reserve's lender-of-last-resort (LOLR) facilities -- the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) -- that provided liquidity against a range of assets during...

We study liquidity transfers between banks through the interbank borrowing and asset sale markets when, (i) surplus banks providingliquidity have market power, ii) there are frictions in the lendingmarket due to moral hazard, and, (iii) assets are bank-specific. We show that when the outside...

When liquidity chasing banks is high, loan officers (or risk-takers) inside banks expect future losses to be readily rolled over. This insurance effect induces them to relax lending standards. The resulting access to cheap credit can fuel asset price bubbles in the economy. To curb such...