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http://hdl.handle.net/10419/27654
  
Title:The price of liquidity: bank characteristics and market conditions PDF Logo
Authors:Fecht, Falko
Nyborg, Kjell G.
Rocholl, Jörg
Issue Date:2008
Series/Report no.:Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2008,30
Abstract:We study differences in the price paid for liquidity across banks using price data at the individual bank level. Unique to this paper, we also have data on individual banks' reserve requirements and actual reserve holdings, thus allowing us to gauge the extent to which a bank is short or long liquidity. We find that the price a bank pays for liquidity depends on the liquidity positions of other banks, as well as its own. There is evidence that liquidity squeezes occasionally occur and short banks pay more the larger is the potential for a squeeze. The price paid for liquidity is decreasing in bank size and small banks are more adversely affected by an increased potential for a squeeze. Contrary to what one might expect, banks in formal liquidity networks do not pay less.
Subjects:liquidity
banking
squeezes
money markets
repo auctions
JEL:G21
D44
E5
G1
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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