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Liquidity Requirements, Liquidity Choice and Financial Stability / Douglas W. Diamond, Anil K. Kashyap.
- Format:
- Book
- Author/Creator:
- Diamond, Douglas W.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w22053.
- NBER working paper series no. w22053
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to survive a run. The incomplete information means that the bank is not automatically incentivized to always hold enough liquid assets to survive runs. Regulation similar to the liquidity coverage ratio and the net stable funding ratio (that are soon be implemented) can change the bank's incentives so that runs are less likely. Optimal regulation would not mimic these rules.
- Notes:
- Print version record
- March 2016.
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