Three Liquidity Crises in Retrospective: Implications for Central Banking Today
AbstractLiquidity problems lie at the heart of crises on financial markets as demonstrated in this paper by detailed descriptions of the stock market crash in 1987, the LTCM-crisis in 1998 and the financial market consequences of 11 September 2001. The events also demonstrate that modern central banks, in particular the U.S. Federal Reserve under Alan Greenspan, provided emergency liquidity to limit the negative effects of such crises. However, the anecdotal and empirical evidence from the three crises shows that such emergency liquidity assistance implies risks to goods price stability if it is not focused on the interbank market and quickly sterilised.
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Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 2011.
Date of creation: Aug 2007
Date of revision:
Liquidity Crises; Financial Stability; Monetary Policy;
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-27 (All new papers)
- NEP-CBA-2007-08-27 (Central Banking)
- NEP-HIS-2007-08-27 (Business, Economic & Financial History)
- NEP-MAC-2007-08-27 (Macroeconomics)
- NEP-MON-2007-08-27 (Monetary Economics)
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