A macroprudential approach to address liquidity risk with the Loan-to-Deposit ratio
This paper maps the empirical features of the Loan-to-Deposit (LTD) ratio with an eye on using it in macroprudential policy to mitigate liquidity risk. We inspect the LTD trends and cycles of 11 euro area countries by filtering methods and analyze the interaction between loans and deposits. We propose that the trend of the LTD ratio is maintained within an upper and lower bound to avoid bad equilibria. To manage the LTD ratio between the boundaries we formulate two macroprudential rules. One that stimulates banks to issue retail deposits in an upturn and one that incentivizes banks to create loanable funds to support lending in a downturn, facilitated by a sufficiently long adjustment period.
|Date of creation:||Feb 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.dnb.nl/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2009.
"Market Liquidity and Funding Liquidity,"
Review of Financial Studies,
Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market liquidity and funding liquidity," LSE Research Online Documents on Economics 24478, London School of Economics and Political Science, LSE Library.
- Lasse Heje Pederson & Markus K Brunnermeier, 2007. "Market Liquidity and Funding Liquidity," FMG Discussion Papers dp580, Financial Markets Group.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market Liquidity and Funding Liquidity," NBER Working Papers 12939, National Bureau of Economic Research, Inc.
- Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
- Mark Mink & Jan P.A.M. Jacobs & Jakob de Haan, 2012.
"Measuring coherence of output gaps with an application to the euro area,"
Oxford Economic Papers,
Oxford University Press, vol. 64(2), pages 217-236, April.
- Jakob de Haan & Jan Jacobs & Mark Mink, 2007. "Measuring Synchronicity and Co-movement of Business Cycles with an Application to the Euro Area," CESifo Working Paper Series 2112, CESifo Group Munich.
- Mark Mink & Jan P.A.M. Jacobs & Jakob de Haan, 2007. "Measuring Synchronicity And Co-Movement Of Business Cycles With An Application To The Euro Area," CAMA Working Papers 2007-19, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Richard Johnson, 2001. "Fiscal reaction rules in numerical macro models," Research Working Paper RWP 01-01, Federal Reserve Bank of Kansas City.
- Mathias Drehmann & Claudio Borio & Kostas Tsatsaronis, 2011.
"Anchoring Countercyclical Capital Buffers: The role of Credit Aggregates,"
International Journal of Central Banking,
International Journal of Central Banking, vol. 7(4), pages 189-240, December.
- Mathias Drehmann & Claudio Borio & Kostas Tsatsaronis, 2011. "Anchoring countercyclical capital buffers: the role of credit aggregates," BIS Working Papers 355, Bank for International Settlements.
- Jagjit S. Chadha & Luisa Corrado, 2011.
"Macro-prudential Policy on Liquidity: What does a DSGE Model tell us?,"
Studies in Economics
1108, School of Economics, University of Kent.
- Chadha, Jagjit S. & Corrado, Luisa, 2012. "Macro-prudential policy on liquidity: What does a DSGE model tell us?," Journal of Economics and Business, Elsevier, vol. 64(1), pages 37-62.
- Jagjit S. Chadha & Luisa Corrado, 2011. "Macro-prudential Policy on Liquidity: What Does a DSGE Model Tell Us?," CEIS Research Paper 193, Tor Vergata University, CEIS, revised 02 May 2011.
- Anil Kashyap & Raghuram Rajan & Jeremy S. Stein, 1998.
"Banks as liquidity providers: an explanation for the co-existence of lending and deposit-taking,"
582, Federal Reserve Bank of Chicago.
- Anil K. Kashyap & Raghuram Rajan & Jeremy C. Stein, 2002. "Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit-Taking," Journal of Finance, American Finance Association, vol. 57(1), pages 33-73, 02.
- Anil K. Kashyap & Raghuram Rajan & Jeremy C. Stein, 1999. "Banks as Liquidity Providers: An Explanation for the Co-Existence of Lending and Deposit-Taking," NBER Working Papers 6962, National Bureau of Economic Research, Inc.
- Andreas Jobst, 2012. "Measuring Systemic Risk-Adjusted Liquidity (SRL); A Model Approach," IMF Working Papers 12/209, International Monetary Fund.
- Mathias Drehmann & Claudio Borio & Kostas Tsatsaronis, 2012. "Characterising the financial cycle: don't lose sight of the medium term!," BIS Working Papers 380, Bank for International Settlements.
- Stephen Cecchetti & Michael R King & James Yetman, 2011. "Weathering the financial crisis: good policy or good luck?," BIS Working Papers 351, Bank for International Settlements.
- Betz, Frank & Oprica, Silviu & Peltonen, Tuomas A. & Sarlin, Peter, 2013.
"Predicting distress in European banks,"
Working Paper Series
1597, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:372. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet)
If references are entirely missing, you can add them using this form.