empirically test the predictions of a new signalling model that offers a rationale for offering two different liquidity facilities … risky than banks that accessed the DW. Our results can contribute to a better design of liquidity facilities during a …

Traditionally, aggregate liquidity shocks are modelled as exogenous events. Extending our previous work (Cao & Illing …, 2007), this paper analyses the adequate policy response to endogenous systemic liquidity risk. We analyse the feedback … between lender of last resort policy and incentives of private banks, determining the aggregate amount of liquidity available …