We investigate the stochastic dynamics of bank liquidity parameters such as liquid assets and nett cash outflow in relation to the global financial crisis. These parameters enable us to determine the liquidity coverage ratio that is one of themetrics used in ratio analysis to measure bank liquidity. In this regard, numerical results show that bank behavior related to liquidity was highly procyc...

The paper shows that Liquidity Deflation, a liquidity-drainage mechanism associated with Safe Asset Shortage, helps to rationalize supply-side liquidity trap and involuntary unemployment under wage/price flexibility, especially in economies that suffered massive liquidity destruction, like advanced economies in the wake of the Lehman crisis. Moreover, Liquidity Deflation is shown to imply defla...

a r t i c l e i n f o This study addresses the impact of equity market liquidity on Canadian economic growth and investigates how consumer attitudes/sentiments affect the dynamic macro-liquidity relationship. Using various market liquidity proxies (e.g., illiquidity ratio and open interest of equity futures) while controlling for a specific set of variables, we obtain the following main results...

An increase in the ability to timely meet commitments which will be due in the near future is a prerequisite for the survival of banks. Hence, the correct and optimal management of liquidity is an important affair that banks should perform. The present study aimed mainly to test the management of asset-liability and liquidity trap in the Credit Institute for Development. The research is applied...

Liquidity providers in a security often use prices of other securities as a source of information to set their quotes. As a result, liquidity is higher when prices are more informative. In turn, prices are more informative when liquidity is higher. We show that this self-reinforcing relationship between price informativeness and liquidity is a source of contagion and fragility: a small drop in ...

The phrase “liquidity effect” was introduced by Milton Friedman (1969) to describe the first of three effects on interest rates caused by an exogenous change in the money supply. The lack of empirical support for the liquidity effect using monthly and quarterly monetary and reserve aggregates data led Hamilton (1997) to suggest that more convincing evidence of the liquidity effect could be obta...

Following the bankruptcy of Lehman Brothers, interbank borrowing and lending dropped, whereas reserve holdings of depository institutions skyrocketed, as the Fed injected liquidity into the U.S. banking sector. This paper introduces bank liquidity risk and limited market participation into a real business cycle model with ex ante identical financial intermediaries and shows, in an analytically ...

Liquidity constraints are an almost ubiquitous assumption in development economics. Yet the direct evidence for liquidity constraints is limited, and many observations consistent with liquidity constraints are equally compatible with precautionary saving or a lack of forward planning. Using household panel data and a source of widely anticipated income in South Africa, this paper tests and reje...

We propose a theory of credit lines provided by banks to firms as a form of monitored liquidity insurance. Bank monitoring and resulting revocations help control illiquidityseeking behavior of firms insured by credit lines. The cost of credit lines is thus greater for firms with high liquidity risk, which in turn are likely to use cash instead of credit lines. We test this implication for corpo...

In this paper we investigate cross-asset liquidity between equity markets and REITs and between REITs and private real estate markets. While many studies have investigated REIT liquidity, and there is an emerging interest in liquidity in the private real estate markets, there appears to be little knowledge of the dynamics of cross-market liquidity. We find lower levels of liquidity for REITs co...