We develop a model in which financial intermediaries hold liquidity to protect themselves from shocks. Depending on parameter values, banks may choose to hold too much or too little liquidity on aggregate compared with the socially optimal amount. The model endogenously generates a situation of...

We develop a model in which banks bid for liquidity provided by the central bank in fixed and variable rate auctions, considering liquidity injections and extractions as well as the impact of a subsequent interbank market. We derive the equilibrium demands of banks establishing the prevalence of...

We examine the system-wide effects of liquidity regulation on banks’ balance sheets. In the general equilibrium model, banks have to hold liquid assets, and choose among illiquid assets varying in the extent to which they are difficult to value before maturity, e.g., structured securities. By...

We analyze the impact of introducing a central bank-issued digital currency (CBDC) on the operational framework of monetary policy and the macroeconomy as a whole. To this end, we develop a New Keynesian model with heterogeneous banks, a frictional interbank market, a central bank with deposit...

This paper makes a conceptual contribution to the e ffect of monetary policy on financial stability. We develop a microfounded network model with endogenous network formation to analyze the impact of central banks' monetary policy interventions on systemic risk. Banks choose their portfolio,...

Evidence suggests that the Colombian interbank funds market is an inhomogeneous and hierarchical network in which a few financial institutions fulfill the role of “super-spreaders” of central bank liquidity among market participants. Results concur with evidence from other interbank markets...

We model the allocation of central bank liquidity among the participants of the interbank market by using network analysis' metrics. Our analytical framework considers that a super-spreader simultaneously excels at receiving (borrowing) and distributing (lending) central bank's liquidity for the...

This paper studies the network structure and fragmentation of the Argentine interbank market. Both the unsecured (CALL) and the secured (REPO) markets are examined. The aim of this study is to understand their actual fragmentation, as well as its potential implications for monetary policy and...

This paper develops a theoretical model which replicates main features of the euro overnight interbank market and the Eurosystem's operational framework, which has been in place since September 2008. Main ingredients of the model are frictions in the interbank market, a refinancing operation...

How does the central bank influence interbank lending? The central bank's policy rates determine the attractiveness of the standing facilities compared with the interbank market. Therefore, by choosing the policy rates the central bank affects the number of banks using the standing facilities...