Outside liquidity, rollover risk, and government bonds

Arbeitspapier

This paper discusses whether financial intermediaries can optimally provide liquidity, or whether the government has a role in creating liquidity by supplying government securities. We discuss a model in which intermediaries optimally manage liquidity with outside rather than inside liquidity: instead of holding liquid real assets that can be used at will, banks sell claims on long-term projects to investors. While increasing efficiency, liquidity management with private outside liquidity is associated with a rollover risk. This rollover risk either keeps intermediaries from providing liquidity optimally, or it makes the economy inherently fragile. In contrast to privately produced claims, government bonds are not associated with coordination problems unless there is the prospect that the government may default. Therefore, efficiency and stability can be enhanced if liquidity management relies on public outside liquidity.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Preprints of the Max Planck Institute for Research on Collective Goods ; No. 2014/14

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts ; National Debt; Debt Management; Sovereign Debt
• Thema: liquidity provision ; liquidity mismatch ; bank run ; roll-over freeze ; outside liquidity ; government bonds ; liquidity regulation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Luck, Stephan ; Schempp, Paul
• Ereignis: Veröffentlichung
• (wer): Max Planck Institute for Research on Collective Goods
• (wo): Bonn
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/102673
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ