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Article: Interbank market freezes and creditor runs
Title | Interbank market freezes and creditor runs |
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Authors | |
Issue Date | 2016 |
Citation | Review of Financial Studies, 2016, v. 29, n. 7, p. 1860-1910 How to Cite? |
Abstract | © The Author 2016. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. We model the interplay between trade in the interbank market and creditor runs on financial institutions. We show that the feedback between them can amplify a small shock into "interbank market freezing" with "liquidity evaporating." Credit crunches of the interbank market drive up the interbank rate. For an individual institution, a higher interbank rate - meaning a higher funding cost - results in more severe coordination problems among creditors in debt rollover decisions. Creditors thus behave more conservatively and run more often. Facing an increased chance of creditor runs, institutions demand more and supply less liquidity, tightening the interbank market. |
Persistent Identifier | http://hdl.handle.net/10722/279347 |
ISSN | 2023 Impact Factor: 6.8 2023 SCImago Journal Rankings: 17.654 |
SSRN | |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Liu, Xuewen | - |
dc.date.accessioned | 2019-10-28T03:02:25Z | - |
dc.date.available | 2019-10-28T03:02:25Z | - |
dc.date.issued | 2016 | - |
dc.identifier.citation | Review of Financial Studies, 2016, v. 29, n. 7, p. 1860-1910 | - |
dc.identifier.issn | 0893-9454 | - |
dc.identifier.uri | http://hdl.handle.net/10722/279347 | - |
dc.description.abstract | © The Author 2016. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. We model the interplay between trade in the interbank market and creditor runs on financial institutions. We show that the feedback between them can amplify a small shock into "interbank market freezing" with "liquidity evaporating." Credit crunches of the interbank market drive up the interbank rate. For an individual institution, a higher interbank rate - meaning a higher funding cost - results in more severe coordination problems among creditors in debt rollover decisions. Creditors thus behave more conservatively and run more often. Facing an increased chance of creditor runs, institutions demand more and supply less liquidity, tightening the interbank market. | - |
dc.language | eng | - |
dc.relation.ispartof | Review of Financial Studies | - |
dc.title | Interbank market freezes and creditor runs | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1093/rfs/hhw017 | - |
dc.identifier.scopus | eid_2-s2.0-84982980368 | - |
dc.identifier.volume | 29 | - |
dc.identifier.issue | 7 | - |
dc.identifier.spage | 1860 | - |
dc.identifier.epage | 1910 | - |
dc.identifier.eissn | 1465-7368 | - |
dc.identifier.isi | WOS:000383282300007 | - |
dc.identifier.ssrn | 2375037 | - |
dc.identifier.issnl | 0893-9454 | - |