Transmission of Liquidity Shocks
AbstractWe examine the linkages between market and funding liquidity pressures, as well as their interaction with solvency issues surrounding key financial institutions during the 2007 subprime crisis. A multivariate GARCH model is estimated in order to test for the transmission of liquidity shocks across U.S. financial markets. It is found that the interaction between market and funding illiquidity increases sharply during the recent period of financial turbulence, and that bank solvency becomes important.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 08/200.
Date of creation: 01 Aug 2008
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