This paper develops a theoretical framework in which asset linkages in a syndicated loan agreement can infect a healthy bank when its partner bank fails. We investigate how capital constraints affect the choice of the healthy bank to takeover or liquidate the exposure held jointly with the...

This paper analyses the effect of the crisis on central bank's refinancing and interbank market. It uses monthly banking-group data on all banks operating in Italy from the inception of the single Eurosystem monetary policy to August 2011. It investigates both directions of the casual nexus...

After August 2007 the plumbing system that supplied banks with wholesale funding, the interbank market, failed because toxic assets obstructed the pipes. Banks were forced to squeeze liquidity in a 'lemons market' or to ask for liquidity 'on tap' from central banks. This paper disentangles the...

This paper tests the hypothesis of liquidity hoarding in the Italian banking system during the 2007-2011 global financial crisis. According to this hypothesis, in periods of crisis, interbank markets stop working and central banks' interventions are ineffective because banks hoard the liquidity...

This paper tests the hypothesis of liquidity hoarding in the Italian banking system during the 2007-2011 global financial crisis. According to this hypothesis, in periods of crisis, interbank markets stop working and central banks' interventions are ineffective because banks hoard the liquidity...

The interplay between liquidity and credit risks in the interbank market is analyzed. Banks are hit by idiosyncratic random liquidity shocks. The market may also be hit by a bad news at a future date, implying the insolvency of some participants and creating a lemon problem; this may end up with...

Banks exchange liquidity in the money market to absorb payment shocks. In a well-functioning market, banks in need of liquidity should not pay a premium when borrowing. We combine data on bank reserves at the central bank and interest rates paid in the money market to study how bank liquidity...

We empirically investigate the effect that relationship lending has on the availability and pricing of interbank liquidity. Our analysis is based on a daily panel of unsecured overnight loans between 1,079 distinct German bank pairs from March 2006 to November 2007, a period that includes the...

We use a unique data set that comprises each bank's bids in the Eurosystem's main refinancing operations and its recourse to the LOLR facility (a) to derive banks' willingness-to-pay for liquidity through a one-week repo and (b) to show that a bank's willingness-to-pay is a good indicator for...

This paper empirically investigates the effect of interbank relationship lending on banks' access to liquidity. Our analysis is based on German interbank payment data which we use to create a panel of unsecured overnight loans between 1079 distinct borrower-lender pairs. The data shows that...