Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212632
Authors: 
Karas, Alexei
Schoors, Koen
Lanine, Gleb
Year of Publication: 
2008
Series/Report no.: 
BOFIT Discussion Papers No. 19/2008
Abstract: 
We suggest an additional transmission channel of contagion on the interbank market - the liquidity channel. Examining the Russian banking sector, we and that the liquidity channel contributes significantly to understanding and predicting interbank market crises. Interbank market stability Granger causes the interbank market structure, while the opposite causality is rejected. This bolsters the view that the interbank market structure is endogenous. The results corroborate the thesis that prudential regulation at the individual bank level is insufficient to prevent systemic crises. We demonstrate that liquidity injections of a classical lender of last resort can effectively mitigate coordination failures on the interbank market both in theory and practice. Apparently, liquidity does matter.
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-929-4
Document Type: 
Working Paper

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