Arbeitspapier
Rollover risk, liquidity and macroprudential regulation
I study rollover risk in the wholesale funding market when intermediaries can hold liquidity ex ante and are subject to fire sales ex post. Precautionary liquidity restores multiple equilibria in a global rollover game. An intermediate liquidity level supports both the usual run equilibrium and an efficient equilibrium. I provide a uniqueness refinement to characterize the privately optimal liquidity choice. Because of fire sales, liquidity holdings are strategic substitutes. Intermediaries free ride on the liquidity of other intermediaries, causing excessive liquidation. A macroprudential authority internalizes the systemic nature of liquidity and restores constrained efficiency by imposing a macroprudential liquidity buffer.
- Language
-
Englisch
- Bibliographic citation
-
Series: Bank of Canada Working Paper ; No. 2014-23
- Classification
-
Wirtschaft
Financial Crises
Portfolio Choice; Investment Decisions
Financial Institutions and Services: Government Policy and Regulation
- Subject
-
Financial institutions
Financial system regulation and policies
- Event
-
Geistige Schöpfung
- (who)
-
Ahnert, Toni
- Event
-
Veröffentlichung
- (who)
-
Bank of Canada
- (where)
-
Ottawa
- (when)
-
2014
- DOI
-
doi:10.34989/swp-2014-23
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ahnert, Toni
- Bank of Canada
Time of origin
- 2014
Other Objects (12)
Prudential liquidity regulation in banking: A literature review
Optimal monetary and macroprudential policies
Macroprudential policy with capital buffers
A microfounded design of interconnectedness-based Macroprudential policy
Macroprudential regulation and systemic capital requirements
How important is liquidity risk for sovereign bond risk premia? Evidence from the London Stock Exchange
Volatility and liquidity costs
An optimal macroprudential policy mix for segmented credit markets
Liquidity, risk, and return: Specifying an objective function for the management of foreign reserves
Liquidity transformation and bank capital requirements
Adverse selection, liquidity, and market breakdown
Strategic complementarities and money market fund liquidity management
Prudential liquidity regulation in banking: A literature review
Optimal monetary and macroprudential policies
Macroprudential policy with capital buffers
A microfounded design of interconnectedness-based Macroprudential policy
Macroprudential regulation and systemic capital requirements
How important is liquidity risk for sovereign bond risk premia? Evidence from the London Stock Exchange
Volatility and liquidity costs
An optimal macroprudential policy mix for segmented credit markets
Liquidity, risk, and return: Specifying an objective function for the management of foreign reserves
Liquidity transformation and bank capital requirements
Adverse selection, liquidity, and market breakdown
Strategic complementarities and money market fund liquidity management
Prudential liquidity regulation in banking: A literature review
Optimal monetary and macroprudential policies
Macroprudential policy with capital buffers
A microfounded design of interconnectedness-based Macroprudential policy
Macroprudential regulation and systemic capital requirements
How important is liquidity risk for sovereign bond risk premia? Evidence from the London Stock Exchange
Volatility and liquidity costs
An optimal macroprudential policy mix for segmented credit markets
Liquidity, risk, and return: Specifying an objective function for the management of foreign reserves
Liquidity transformation and bank capital requirements
Adverse selection, liquidity, and market breakdown