Arbeitspapier
A Monetary Equilibrium with the Lender of Last Resort
This paper studies the role of a lender of last resort (LLR) in a monetary model where a shortage of a bank's monetary reserves (a liquidity crisis) occurs endogenously. We show that discount window lending by the LLR is welfare-improving but reduces banks' ex-ante incentive to hold monetary reserves, which increases the probability of a liquidity crisis, and can cause moral hazard in capital investment. We also analyze the combined effects of monetary and extensive LLR policies, such as a nominal interest rate, a lending rate, and a haircut.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 10439
- Klassifikation
-
Wirtschaft
Money and Interest Rates: General
- Thema
-
monetary equilibrium
liquidity crisis
lender of last resort
moral hazard
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Matsuoka, Tarishi
Watanabe, Makoto
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2023
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Matsuoka, Tarishi
- Watanabe, Makoto
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2023
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