In a dual liquidity crisis, both the government and the banking sector are under severe funding stress. By nature,dual crises have the potential of being particularly disruptive and damaging. Thus, understanding their mechanics, how they unfold and how they can be addressed under various...

This paper contributes to the literature on liquidity crises and central banks acting as lenders of last resort by capturing the mechanics of dual liquidity crises, i.e. funding crises which encompass both the private and the public sector, within a closed system of financial accounts. We...

After the Lehman default, but also during the euro area sovereign debt crisis, central banks have tended to extend the ability of banks to take recourse to central bank credit operations through changes of the collateral framework (e.g. CGFS, 2008 – in consistence with previous narratives,...

This paper analyses the potential roles of bank asset fire sales and recourse to central bank credit to ensure banks' funding liquidity and solvency. Both asset liquidity and central bank haircuts are modelled as power functions within the unit interval. Funding stability is captured as...

This paper analyses the roles of bank asset fire sales and recourse to the central bank as lender of last resort for the equilibrium debt structure of banks and the spread between bank lending rates and the central bank policy rate (the short term risk free rate). The asset side of banks is...