Financial Integration and Liquidity Crises
| العنوان: | Financial Integration and Liquidity Crises |
|---|---|
| المؤلفون: | Fabio Castiglionesi, Guido Lorenzoni, Fabio Feriozzi |
| المساهمون: | Department of Finance, Research Group: Finance |
| المصدر: | Management Science, 65(3), 955-975. INFORMS Inst.for Operations Res.and the Management Sciences |
| بيانات النشر: | Institute for Operations Research and the Management Sciences (INFORMS), 2019. |
| سنة النشر: | 2019 |
| مصطلحات موضوعية: | 050208 finance, Strategy and Management, media_common.quotation_subject, skewness, 05 social sciences, Financial integration, Liquidity crisis, liquidity crises, Financial system, Management Science and Operations Research, Liquidity risk, interbank markets, Liquidity premium, Interest rate, Market liquidity, Financial regulation, 0502 economics and business, Economics, Interbank lending market, 050207 economics, financial integration, media_common |
| الوصف: | This paper analyzes the effects of financial integration on the stability of the banking system. Financial integration allows banks in different regions to smooth local liquidity shocks by borrowing and lending on a world interbank market. We show under which conditions financial integration induces banks to reduce their liquidity holdings and to shift their portfolios toward more profitable but less liquid investments. Integration helps reallocate liquidity when different banks are hit by uncorrelated shocks. However, when a correlated (systemic) shock hits, the total liquid resources in the banking system are lower than in autarky. Therefore, financial integration leads to more stable interbank interest rates in normal times but to larger interest rate spikes in crises. These results hold in a setup in which financial integration is welfare improving from an ex ante point of view. We also look at the model’s implications for financial regulation and show that, in a second-best world, financial integration can increase the welfare benefits of liquidity requirements. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2841 . This paper was accepted by Neng Wang, finance. |
| تدمد: | 1526-5501 0025-1909 |
| DOI: | 10.1287/mnsc.2017.2841 |
| URL الوصول: | https://explore.openaire.eu/search/publication?articleId=doi_dedup___::68308b640eb71341f43f0b42f817d719 https://doi.org/10.1287/mnsc.2017.2841 |
| Rights: | OPEN |
| رقم الانضمام: | edsair.doi.dedup.....68308b640eb71341f43f0b42f817d719 |
| قاعدة البيانات: | OpenAIRE |
| تدمد: | 15265501 00251909 |
|---|---|
| DOI: | 10.1287/mnsc.2017.2841 |