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Systemic risk, interbank relations and liquidity provision by the Central Bank

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dc.contributor.author Freixas, Xavier
dc.contributor.author Parigi, Bruno M.
dc.contributor.author Rochet, Jean Charles
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.accessioned 2017-07-26T12:08:02Z
dc.date.available 2017-07-26T12:08:02Z
dc.date.issued 1998-10-01
dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=440
dc.identifier.citation Journal of Money Credit and Banking 32(3, part 2), 611-638, August 2000
dc.identifier.uri http://hdl.handle.net/10230/774
dc.description.abstract We model systemic risk in an interbank market. Banks face liquidity needs as consumers are uncertain about where they need to consume. Interbank credit lines allow to cope with these liquidity shocks while reducing the cost of maintaining reserves. However, the interbank market exposes the system to a coordination failure (gridlock equilibrium) even if all banks are solvent. When one bank is insolvent, the stability of the banking system is affected in various ways depending on the patterns of payments across locations. We investigate the ability of the banking industry to withstand the insolvency of one bank and whether the closure of one bank generates a chain reaction on the rest of the system. We analyze the coordinating role of the Central Bank in preventing payments systemic repercussions and we examine the justification of the Too-big-to-fail-policy.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 440
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Systemic risk, interbank relations and liquidity provision by the Central Bank
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2017-07-23T02:05:42Z
dc.subject.keyword systemic risk
dc.subject.keyword central bank
dc.subject.keyword prudential regulation
dc.subject.keyword interbank markets
dc.subject.keyword payment systems
dc.subject.keyword Finance and Accounting
dc.rights.accessRights info:eu-repo/semantics/openAccess

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