Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/193526
Authors: 
Silva, André
Year of Publication: 
2016
Series/Report no.: 
ESRB Working Paper Series 19
Abstract: 
This paper examines whether banks' liquidity and maturity mismatch decisions are affected by the choices of competitors and the impact of these coordinated funding liquidity policies on financial stability. Using a novel identification strategy where interactions are structured through decision networks, I show that banks do consider their peers' liquidity choices when determining their own. This effect is asymmetric and not present in bank capital choices. Importantly, I find that these strategic funding liquidity decisions increase both individual banks' default risk and overall systemic risk. From a macroprudential perspective, the results highlight the importance of explicitly regulating systemic liquidity risk.
Subjects: 
funding liquidity risk
financial stability
macroprudential policy
JEL: 
G20
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-95081-46-8
Document Type: 
Working Paper
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