Liquidity and credit risks in the UK’s financial crisis
This paper investigates the relationship between credit risk and liquidity components in the interbank spread and how this relationship unfolded during the recent financial crisis. We find that prior to the central bank’s Bank of England’s intervention counterpart risk was a major factor in the widening of the spread and also caused a rise in liquidity risk. However, this relationship was reversed after central bank started quantitative easing (QE). Using the accumulated value of asset purchases as a proxy for central bank’s liquidity provisions, we provide evidence that the QE operations were successful in reducing liquidity premia and ultimately, indirectly, credit risk.
|Date of creation:||01 Jan 2013|
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- Suzanne Fry & Felix Ritchie, 2012. "Issues in the measurement of low pay: 2010," Working Papers 20121210, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
- Gail Pacheco & De Wet van der Westhuizen & Don J. Webber, 2012.
"The changing influence of culture on job satisfaction across Europe: 1981-2008,"
2012-06, Auckland University of Technology, Department of Economics.
- Gail Pacheco & De Wet van der Westhuizen & Don Webber, 2012. "The changing influence of culture on job satisfaction across Europe: 1981-2008," Working Papers 20121220, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
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