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A consistent framework for optimal liquidity management is presented. This framework optimizes the cost of covering expected cashflow gaps without violating regulatory and business constraints. Anticipated economic value loss, cashflow loss, and adverse market impact are the major drivers of...
Persistent link: https://www.econbiz.de/10012932264
Recent experience with interest rates hitting the effective lower bound and agents facing binding borrowing constraints has emphasised the importance of understanding the behaviour of an economy in which some variables may be restricted at times. The extended path algorithm is a commonly used...
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We provide new international evidence for a monetary policy liquidity transmission channel in the United States, United Kingdom, and the Eurozone. The central banks of these countries are, with a different degree, able to soften the economic downward spiral after an unexpected arrival of a...
Persistent link: https://www.econbiz.de/10012949651
This paper presents a portfolio model of asset price effects arising from large-scale asset purchases by central banks — commonly known as quantitative easing (QE). Two financial frictions, segmentation of the market for central bank reserves and imperfect asset substitutability, give rise to...
Persistent link: https://www.econbiz.de/10012992570
In this paper we study the role of household portfolio rebalancing channel for the aggregate and redistributive effects of monetary policy. The transmission of monetary policy works not only through the usual income and substitution motives, but also through an endogenous portfolio rebalancing...
Persistent link: https://www.econbiz.de/10013321564
We propose that institutional investors’ portfolio rebalancing across asset classes contributes to the stock market’s puzzlingly large response to monetary shocks. We identify this channel through a cross-sectional approach and find that, ceteris paribus, a stock with 10% higher ownership...
Persistent link: https://www.econbiz.de/10014351049
We analyse the effects of central bank government bond purchases in an estimated DSGE model for the euro area. In the model, central bank asset purchases are relevant in so far as agency costs distort banks' asset allocation between loans and bonds, and households face transaction costs when...
Persistent link: https://www.econbiz.de/10012951375
We consider a large trader liquidating a portfolio using a transparent trading venue with price impact and a dark pool with execution uncertainty. The optimal execution strategy uses both venues continuously, with dark pool orders over-/underrepresenting the portfolio size depending on return...
Persistent link: https://www.econbiz.de/10013010936