persistence of liquidity shocks. Following a theory of long-term interbank funding a financial system which is modeled as a micro … policy and therefore ultimately the real economy. In particular, it facilitates banks' liquidity management. This paper aims … at extending the literature which views interbank markets as mutual liquidity insurance mechanism by taking into account …

We formulate a model of the banking system in which banks control both their supply of liquidity, through cash holdings …, and their exposures to risky interbank loans. The value of interbank loans jumps when banks suffer liquidity shortages …, which can be caused by the arrival of large enough liquidity shocks. In two distinct settings, we compute the unique optimal …

liquidity shock related to the U.S. tapering observed in May 2013. We find that both liquidity shocks are associated with higher …This paper examines the impact of exogenous liquidity shocks on banks borrowing funds in the interbank market. We … evaluate the effects of idiosyncratic liquidity shocks — arising from deposits outflow at the bank level — and of the aggregate …