On the instability of private intertemporal liquidity provision

The provision of intertemporal liquidity by banks is known to be subject to coordination failures. We establish that asset markets providing intertemporal liquidity are also inherently unstable. These findings challenge the notion of an optimal private provision of liquidity.

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Bibliographic Details
Published inEconomics letters Vol. 209; p. 110117
Main Authors Dietrich, Diemo, Gehrig, Thomas
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.12.2021
Elsevier Science Ltd
Subjects
Assets
Banking industry
Coordination
Instability
Liquidity
Liquidity insurance
Market incompleteness
Mutual funds
Overlapping generations
D52
Liquidity insurance
E22
G21
D15
Instability
Overlapping generations
Market incompleteness
Online AccessGet full text
ISSN0165-1765
1873-7374
DOI10.1016/j.econlet.2021.110117

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Summary:The provision of intertemporal liquidity by banks is known to be subject to coordination failures. We establish that asset markets providing intertemporal liquidity are also inherently unstable. These findings challenge the notion of an optimal private provision of liquidity.
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ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2021.110117