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Liquidity Funding Shocks : The Role of Banks' Funding Mix

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Abstract

This study attempts to evaluate the impact of an increase in banks' funding stress and its transmission to the real economy, taking into account different funding sources banks can rely on. Using aggregate data from eight Euro area financial systems, we find that following a liquidity funding shock, both credit and GDP decline in different amounts and lengths. GDP reverts faster than credit. Furthermore, periphery countries experience a more pronounced fall in deposits and credit growth and the negative effects from the shock last longer than in core countries. Banks' funding seems to play a relevant role as periphery countries rely more on wholesale funding during normal times.

Suggested Citation

  • Antonio Alvarez & Alejandro Fernandez & Joaquin Garcia-Cabo & Diana Posada, 2019. "Liquidity Funding Shocks : The Role of Banks' Funding Mix," International Finance Discussion Papers 1245, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1245
    DOI: 10.17016/IFDP.2019.1245
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    Cited by:

    1. Mohamed Aymen Ben Moussa & Chedia Hedfi, 2025. "Real-Time Analysis of Liquidity's Impact on Bank Lending in Tunisia," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 15(2), pages 27-39.

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    Keywords

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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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