Arbeitspapier
Rollover risk, liquidity, and macro-prudential 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. I demonstrate that 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 macro-prudential authority internalizes the systemic nature of liquidity and restores constrained efficiency by imposing a macro-prudential liquidity buffer.
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 1667
- Klassifikation
-
Wirtschaft
Financial Crises
Portfolio Choice; Investment Decisions
Financial Institutions and Services: Government Policy and Regulation
- Thema
-
global games
multiplicity
portfolio choice
wholesale funding
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Ahnert, Toni
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2014
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Ahnert, Toni
- European Central Bank (ECB)
Entstanden
- 2014
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