Arbeitspapier
Liquidity backstops and dynamic debt runs
Liquidity backstops have important implications for financial stability. In this paper, we provide a microfoundation for the important role of liquidity backstops in mitigating runs (or, conversely, the role of the lack of liquidity backstops in exacerbating runs) based on a dynamic model of debt runs. We focus on the municipal bond markets for variable rate demand obligations (VRDOs) and auction rate securities (ARS). The different experiences in these markets during the recent financial crisis of 2007-09 provide a natural experiment to identify the value of a liquidity backstop in mitigating runs. Through structural estimation of the model, we show that the value of a liquidity backstop is about 14.5 basis points per annum. The results in this paper shed light on one central difference between shadow banks and traditional banks in terms of their differential access to public liquidity backstops.
- Sprache
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Englisch
- Erschienen in
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Series: Working Paper ; No. 2015-13
- Klassifikation
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Wirtschaft
General Financial Markets: General (includes Measurement and Data)
Financial Institutions and Services: General
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Thema
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liquidity backstop
debt run
- Ereignis
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Geistige Schöpfung
- (wer)
-
Wei, Bin
Yue, Vivian Z.
- Ereignis
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Veröffentlichung
- (wer)
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Federal Reserve Bank of Atlanta
- (wo)
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Atlanta, GA
- (wann)
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2015
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Wei, Bin
- Yue, Vivian Z.
- Federal Reserve Bank of Atlanta
Entstanden
- 2015