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Liquidity hoarding and interbank market spreads: the role of counterparty risk

Listed author(s):
  • Heider, Florian
  • Hoerova, Marie
  • Holthausen, Cornelia

We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow banks to have private information about the risk of their assets. We show how banks JEL Classification: G01, G21, D82

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File URL: https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1126.pdf
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Paper provided by European Central Bank in its series Working Paper Series with number 1126.

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Date of creation: Dec 2009
Handle: RePEc:ecb:ecbwps:20091126
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  13. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-638, August.
  14. Flannery, Mark J, 1996. "Financial Crises, Payment System Problems, and Discount Window Lending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 804-824, November.
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  16. Douglas W. Diamond & Raghuram G. Rajan, 2009. "Illiquidity and Interest Rate Policy," NBER Working Papers 15197, National Bureau of Economic Research, Inc.
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  26. Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
  27. Bhattacharya, Sudipto & Fulghieri, Paolo, 1994. "Uncertain liquidity and interbank contracting," Economics Letters, Elsevier, vol. 44(3), pages 287-294.
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