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We provide a theory to investigate the implications of time-varying bailout policy for rational bubbles in an infinite … price volatility and economic fluctuations. In the presence of this tradeoff, we examine the efficiency and the welfare …
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Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock-return volatility increases with unused commitments, but the...
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Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock-return volatility increases with unused commitments, but the...
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