We analyze how the inflow of liquidity through TARP funds in the wake of the 2007/2008 financial crisis impacted banks' interbank market activity. We show that TARP banks increased interbank market activity statistically and economically in a very significant way. Their interbank lending...

The industrial organization approach to banking is extended to analyze the effects of interbank market activity and regulatory liquidity requirements on bank behavior. A multi-stage decision situation allows for considering the interaction between credit risk and liquidity risk of banks. This...

The breakdown of the interbank money markets in the face of the recent financial crisis has forced central banks and governments to take extraordinary measures to sustain financial stability. In this paper we investigate which influence central bank activity has on interbank markets. In our...