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Understanding and Measuring Liquidity Risk: A Selection of Recent Research




During the recent financial crisis, one of the forces set in motion by the initial losses on subprime-mortgage loans was a significant decline in the market liquidity of assets and in the ability of financial institutions to obtain funding in wholesale markets. In this article, the authors summarize recent research that clarifies the role of liquidity in destabilizing the financial system and examine the implications of this research for the recently announced financial system reforms, including Basel III.

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  • Céline Gauthier & Hajime Tomura, 2011. "Understanding and Measuring Liquidity Risk: A Selection of Recent Research," Bank of Canada Review, Bank of Canada, vol. 2011(Spring), pages 3-11.
  • Handle: RePEc:bca:bcarev:v:2011:y:2011:i:spring11:p:3-11

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    References listed on IDEAS

    1. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    2. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
    3. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    4. Paul Fenton & Stephen Murchison, 2006. "ToTEM: The Bank of Canada's New Projection and Policy-Analysis Model," Bank of Canada Review, Bank of Canada, vol. 2006(Autumn), pages 5-18.
    5. Stephen Murchison & Andrew Rennison, 2006. "ToTEM: The Bank of Canada's New Quarterly Projection Model," Technical Reports 97, Bank of Canada.
    6. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    7. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers 2246, C.E.P.R. Discussion Papers.
    8. Meenakshi Basant Roi & Rhys R. Mendes, 2007. "Should Central Banks Adjust Their Target Horizons in Response to House-Price Bubbles?," Discussion Papers 07-4, Bank of Canada.
    9. Césaire Meh, 2011. "Bank Balance Sheets, Deleveraging and the Transmission Mechanism," Bank of Canada Review, Bank of Canada, vol. 2011(Summer), pages 23-34.
    10. Carlos De Resende & René Lalonde, 2011. "The BoC-GEM-Fin: Banking in the Global Economy," Bank of Canada Review, Bank of Canada, vol. 2011(Summer), pages 11-21.
    11. Andrés, Javier & López-Salido, J David & Nelson, Edward, 2004. "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium," CEPR Discussion Papers 4336, C.E.P.R. Discussion Papers.
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