Liquidity hoarding and interbank market rates: The role of counterparty risk

• 成果类型: Article
• 署名作者: Heider, Florian; Hoerova, Marie; Holthausen, Cornelia
• 署名单位: European Central Bank
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2015.07.002
• 发表日期: 2015
• 页码: 336-354
• 关键词: interbank market; endogenous liquidity; COUNTERPARTY RISK; asymmetric information; Market break-down; Financial crisis

摘要

We develop a model of interbank lending and borrowing with counterparty risk. The model has two key ingredients. First, liquidity in the banking sector is endogenous, so there is an opportunity cost of holding liquid assets. Second, banks are privately informed about the risk of their long-term assets, which can lead to adverse selection and high interest rates in the interbank market. We identify a novel form of a market break-down, which can lead to liquidity hoarding. It arises because adverse selection in the interbank market changes the opportunity cost of holding liquidity. We use the model to shed light on developments in interbank markets prior to and during the 2007-09 financial crisis, as well as the effectiveness of policy interventions aimed at restoring interbank market activity. (C) 2015 Elsevier B.V. All rights reserved.