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Financial Intermediation and Liquidity

Author

Listed:
  • Fabio Castiglionesi

    (CentER, EBC and Tilburg University)

Abstract

This paper first reviews the basic theory of financial intermediation. In particular, the paper presents the main modeling device that rationalizes financial intermediaries as liquidity providers. In the second part of the paper we build on the basic model to analyze recent developments in the theory of financial intermediation. Especially motivated by the 2007/2008 financial crisis, we show how this literature could help to explain phenomena like financial contagion and systemic liquidity crises. Finally, we deal with the possible welfare benefit of liquidity regulation.

Suggested Citation

  • Fabio Castiglionesi, 2013. "Financial Intermediation and Liquidity," Rivista di Politica Economica, SIPI Spa, issue 1, pages 7-36, January-M.
    • Handle: RePEc:rpo:ripoec:y:2013:i:1:p:7-36
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    Citations

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    Cited by:

    1. Elena Carletti & Agnese Leonello, 2019. "Credit Market Competition and Liquidity Crises," Review of Finance, European Finance Association, vol. 23(5), pages 855-892.
    2. Hiroshi Fujiki, 2013. "Policy Measures to Alleviate Foreign Currency Liquidity Shortages under Aggregate Risk with Moral Hazard," The Japanese Economic Review, Japanese Economic Association, vol. 64(4), pages 504-536, December.
    3. Fukuda, Shin-ichi, 2012. "Market-specific and currency-specific risk during the global financial crisis: Evidence from the interbank markets in Tokyo and London," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3185-3196.
    4. in ’t Veld, Daan & van Lelyveld, Iman, 2014. "Finding the core: Network structure in interbank markets," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 27-40.
    5. Fabio Castiglionesi & Fabio Feriozzi & Gyöngyi Lóránth & Loriana Pelizzon, 2014. "Liquidity Coinsurance and Bank Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(2-3), pages 409-443, March.
    6. Daron Acemoglu & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2015. "Systemic Risk and Stability in Financial Networks," American Economic Review, American Economic Association, vol. 105(2), pages 564-608, February.
    7. Augusto Hasman, 2013. "A Critical Review Of Contagion Risk In Banking," Journal of Economic Surveys, Wiley Blackwell, vol. 27(5), pages 978-995, December.
    8. Vollmer, Uwe & Wiese, Harald, 2016. "Central bank standing facilities, counterparty risk, and OTC-interbank lending," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 101-122.
    9. Martín-Oliver, Alfredo & Ruano, Sonia & Salas-Fumás, Vicente, 2013. "Why high productivity growth of banks preceded the financial crisis," Journal of Financial Intermediation, Elsevier, vol. 22(4), pages 688-712.

    More about this item

    Keywords

    financial intermediation; liquidity holding; interbank markets; contagion; systemic liquidity crisis.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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