Banks, Liquidity Management and Monetary Policy
We develop a new framework for studying the implementation of monetary policy through the banking sector. Banks are subject to a maturity mismatch problem leading to precautionary holdings of reserves. Through various instruments, monetary policy alters tradeos banks face between lending, holding reserves, holding deposits and paying dividends. This translates into the real economy via eects on real interests and lending. We study how these instruments interact with shocks to the volatility in the payments system, bank losses, the demand for loans and with capital requirements. We use a calibrated version of the model to answer, quantitatively, why have banks held onto a substantial increase in reserves while not increasing lending since 2008.
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|Date of creation:||2014|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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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.:
- Saki Bigio, 2015.
"Endogenous Liquidity and the Business Cycle,"
American Economic Review,
American Economic Association, vol. 105(6), pages 1883-1927, June.
- New York University & Saki Bigio, 2010. "Endogenous Liquidity and the Business Cycle," 2010 Meeting Papers 672, Society for Economic Dynamics.
- Saki Bigio, 2014. "Endogenous Liquidity and the Business Cycle," Working Papers 2014-24, Peruvian Economic Association.
- Armantier, Olivier & Ghysels, Eric & Sarkar, Asani & Shrader, Jeffrey, 2015. "Discount window stigma during the 2007–2008 financial crisis," Journal of Financial Economics, Elsevier, vol. 118(2), pages 317-335.
- Armantier, Olivier & Ghysels, Eric & Sarkar, Asani & Shrader, Jeffrey, 2011. "Discount window stigma during the 2007-2008 financial crisis," Staff Reports 483, Federal Reserve Bank of New York, revised 01 Aug 2015.
- Smets, Frank & Collard, Fabrice & Boissay, Frédéric, 2013. "Booms and systemic banking crises," Working Paper Series 1514, European Central Bank. Full references (including those not matched with items on IDEAS)