Arbeitspapier
The impact of exogenous liquidity shocks on banks funding costs: Microevidence from the unsecured interbank market
This paper examines the impact of exogenous liquidity shocks in the unsecured interbank market. We evaluate the effects of idiosyncratic liquidity shocks - arising from deposits outflow at the bank level - and of the aggregate liquidity shock related to the U.S. tapering observed between May and September of 2013. We find that both liquidity shocks are associated with higher interbank loan prices, albeit the magnitude of the overprice and the impact on the access to interbank liquidity differ depending on the borrower-specific characteristics. More capitalized and liquid banks tend to pay less for liquidity - concurrent with evidence on market discipline - but also can absorb better the impact of exogenous liquidity shocks, suggesting benefits from capital and liquidity ratios. Our results suggest that lending relationships can alleviate funding costs during idiosyncratic liquidity shocks, while central bank liquidity contributes to smooth the impact of aggregate liquidity shocks. Results have implications for both financial stability and monetary policy transmission.
- Sprache
-
Englisch
- Erschienen in
-
Series: Graduate Institute of International and Development Studies Working Paper ; No. HEIDWP01-2019
Interest Rates: Determination, Term Structure, and Effects
Central Banks and Their Policies
Transactional Relationships; Contracts and Reputation; Networks
Asset Pricing; Trading Volume; Bond Interest Rates
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
market discipline
liquidity shocks
monetary policy
financial stability
- Handle
- Letzte Aktualisierung
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20.09.2024, 08:22 MESZ
Objekttyp
- Arbeitspapier
Beteiligte
- Sarmiento, Miguel
- Graduate Institute of International and Development Studies
Entstanden
- 2019
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