This paper examines the impact of exogenous liquidity shocks in the unsecured interbank market. We evaluate the effects … of idiosyncratic liquidity shocks - arising from deposits outflow at the bank level - and of the aggregate liquidity … shock related to the U.S. tapering observed between May and September of 2013. We find that both liquidity shocks are …

This paper presents a theory that explains why it is beneficial for banks to engage in circular lending activities on …

demand for liquidity in the interbank market as wells as banks' access to this market. Results indicate that riskier banks … pay higher prices and borrow less liquidity, concurrent with the existence of market discipline. More capitalized and … higher prices and hoard liquidity when liquidity positions across them are more imbalanced and during a monetary policy …

Banks can deal with their liquidity risk by holding liquid assets (self-insurance), by participating in interbank … to show that undiversi fiable liquidity risk, i.e. the liquidity risk that banks are unable to coinsure on interbank … liquidity risk hold more capital. We posit that empirically banks that are more exposed to undiversifi able liquidity risk are …