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dc.contributor.authorALLEN, Franklin
dc.contributor.authorCARLETTI, Elena
dc.contributor.authorGALE, Douglas
dc.date.accessioned2009-02-19T16:31:10Z
dc.date.available2009-02-19T16:31:10Z
dc.date.issued2009
dc.identifier.issn1725-6704
dc.identifier.urihttps://hdl.handle.net/1814/10677
dc.description.abstractWe develop a simple model of the interbank market where banks trade a long term, safe asset. We show that when there is a lack of opportunities for banks to hedge aggregate and idiosyncratic liquidity shocks, the interbank market is characterized by excessive price volatility. In such a situation, a central bank can implement the constrained efficient allocation by using open market operations to fix the short term interest rate. The model shows also that market freezes, where banks stop trading with each other, can be a feature of the constrained efficient allocation if there is sufficient uncertainty about aggregate liquidity demand compared to idiosyncratic liquidity demand.en
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2009/09en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectinterbank marketen
dc.subjectliquidityen
dc.subjectcentral bank interventionen
dc.subjectopen market operationsen
dc.subjectG01en
dc.subjectG18en
dc.subjectG21en
dc.titleInterbank Market Liquidity and Central Bank Interventionen
dc.typeWorking Paperen
dc.neeo.contributorALLEN|Franklin|aut|
dc.neeo.contributorCARLETTI|Elena|aut|EUI70001
dc.neeo.contributorGALE|Douglas|aut|
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