Self-fulfilling runs and endogeneous liquidity creation

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• dc.contributor.author Rivero Leiva, Davidca
• dc.contributor.author Rodríguez Mendizábal, Hugoca
• dc.date.accessioned 2018-04-26T10:13:23Z
• dc.date.available 2018-04-26T10:13:23Z
• dc.date.issued 2018-03
• dc.description.abstract This paper incorporates endogenous money creation into the liquidity mismatch problem of Diamond and Dybvig (1983). We characterize a nominal economy where demandable deposits are created through lending. Depositors use sight deposits to buy consumption goods and the banks manage reserves to clear payments and to offset liquidity risk. We show that deposit contracts are suboptimal in terms of liquidity risk-sharing. We also observe that the self-fulfilling run depends on the refinancing rate of the central bank. Our analysis emphasizes the importance of effective lender of last resort policies to prevent expectational banking panics.ca
• dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
• dc.format.mimetype application/pdfca
• dc.identifier.uri http://hdl.handle.net/10230/34483
• dc.language.iso engca
• dc.relation.ispartofseries ADEMU Working Paper Series;90
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
• dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.ca
• dc.rights.accessRights info:eu-repo/semantics/openAccessca
• dc.rights.uri https://creativecommons.org/licenses/by/4.0/ca
• dc.subject.keyword Bank runsen
• dc.subject.keyword Inside moneyen
• dc.subject.keyword Risk-sharingen
• dc.title Self-fulfilling runs and endogeneous liquidity creationca
• dc.type info:eu-repo/semantics/workingPaperca