Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111196
Authors: 
Berentsen, Aleksander
Müller, Benjamin
Year of Publication: 
2014
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 139
Abstract: 
We extend the analysis of the interbank market model of Gale and Yorulmazer (2013) by studying a larger set of trading mechanisms. A trading mechanism, which allows for randomized trading, restores efficiency. In contrast to Gale and Yorulmazer, we find that fire-sale asset prices are efficient and that no liquidity hoarding occurs in equilibrium. While Gale and Yorulmazer find that the market provides insufficient liquidity, we find that it provides too much liquidity.
Subjects: 
Fire-sales
lotteries
liquidity hoarding
interbank markets
indivisibility
JEL: 
G12
G21
G33
D83
Document Type: 
Working Paper

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