banks play complex, long horizon games and face more than one tradeoff. We account for these issues in a simple infinite … bankruptcy. We term these factors discipline and stability effects, respectively. The central bank’s welfare decreases with … central banks cannot attain both low inflation and financial stability. …

incentives of private banks, determining the aggregate amount of liquidity available. We show that imposing minimum liquidity … standards for banks ex ante is a crucial requirement for sensible lender-of-last-resort policy. In addition, we analyze the … impact of equity requirements and narrow banking, in the sense that banks are required to hold sufficient liquid funds so as …

between lender of last resort policy and incentives of private banks, determining the aggregate amount of liquidity available …. We show that imposing minimum liquidity standards for banks ex ante are a crucial requirement for sensible lender of last … resort policy. In addition, we analyse the impact of equity requirements and narrow banking, in the sense that banks are …

allocation, even though it encourages more risk taking (less liquid investment) by private banks. In general, however, there is … in bad states. In the prevailing mixed-strategy equilibrium, depositors are worse off than if banks would coordinate on … that even in the case of pure illiquidity risk, there is a serious commitment problem for central banks. We show that …

between lender of last resort policy and incentives of private banks, determining the aggregate amount of liquidity available …. We show that imposing minimum liquidity standards for banks ex ante are a crucial requirement for sensible lender of last … resort policy. In addition, we analyse the impact of equity requirements and narrow banking, in the sense that banks are …

liquid asset for banks. Central banks do not only passively supply money to meet demand for transaction, as often assumed in … these models, instead they also actively inject liquidity into market, taking banks' illiquid assets as collateral. We … examine both roles of money in an integrated framework, in which banks are subject to aggregate illiquidity risk. With fixed …

between lender of last resort policy and incentives of private banks, determining the aggregate amount of liquidity available …. We show that imposing minimum liquidity standards for banks ex ante are a crucial requirement for sensible lender of last … resort policy. In addition, we analyse the impact of equity requirements and narrow banking, in the sense that banks are …

central bank's reaction to liquidity stress gives banks incentives to invest in excessive liquidity transformation, triggering …

banks play complex, long horizon games and face more than one tradeoff. We account for these issues in a simple infinite … central banks cannot attain both low inflation and financial stability. …