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Allen N Berger - One of the best experts on this subject based on the ideXlab platform.
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expanding the Bank Liquidity creation concept Bank capital and secondary market loan Liquidity
Social Science Research Network, 2021Co-Authors: Allen N Berger, Donghang Zhang, Yijia ZhaoAbstract:We expand the Bank Liquidity creation concept from its current focus on Bank portfolios to include providing Liquidity to secondary markets for financial assets. We test opposing theories of the effects of Bank capital on secondary market Liquidity of syndicated loans. We find that higher Bank capital significantly increases secondary market loan Liquidity, consistent with risk absorption theory. The data also support the loan riskiness and Bank balance sheet quality channels behind this theory. We use the exogenous capital shock from the 2012 JPMorgan Chase ‘London Whale’ incident to help establish causality. Our findings have important research and policy implications.
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government guarantees and Bank Liquidity creation around the world
Social Science Research Network, 2020Co-Authors: Allen N Berger, Herman Saheruddin, Daxuan ZhaoAbstract:Governments provide guarantees to Banks, such as deposit insurance, often increasing them during financial crises. While risk effects are well researched, impacts on Bank output remain largely unexplored. We investigate Bank output effects using data from 75 countries on Bank Liquidity creation, a comprehensive Bank output measure. We address the reverse-causality identification challenge by examining effects of home country guarantees on Liquidity creation by subsidiary Banks in foreign host nations, and tackle omitted-variables concerns by specifying host country × year fixed effects. Our striking findings suggest that home-country guarantees increase decrease subsidiary Bank Liquidity creation by as much as 15%.
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economic policy uncertainty and Bank Liquidity hoarding
Journal of Financial Intermediation, 2020Co-Authors: Allen N Berger, Omrane Guedhami, Hugh Hoikwang KimAbstract:Abstract We examine the impact of economic policy uncertainty (EPU) on Bank Liquidity hoarding. We create a comprehensive measure of Bank Liquidity hoarding that takes into account asset-, liability-, and off-balance sheet activities. Using over one million Bank-quarter observations, we find that in response to EPU, Banks hoard Liquidity overall and through all three components. This behavior is more pronounced for Banks with less Liquidity, more peer-Bank spillover effects, and more EPU exposure. Additional analyses of interest rate spreads on several Bank products suggest that our findings reflect at least in part Bank choices, rather than just the reactions of customers.
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economic policy uncertainty and Bank Liquidity creation
Social Science Research Network, 2017Co-Authors: Allen N Berger, Omrane Guedhami, Hugh Hoikwang KimAbstract:We examine the impact of economic policy uncertainty (EPU) on Bank Liquidity hoarding. We create a comprehensive measure of Bank Liquidity hoarding that takes into account asset-, liability-, and off-balance sheet activities. Using over one million Bank-quarter observations, we find that in response to EPU, Banks hoard Liquidity overall and through all three components. This behavior is more pronounced for Banks with less Liquidity, more peer-Bank spillover effects, and more EPU exposure. Additional analyses of interest rate spreads on several Bank products suggest that our findings reflect at least in part Bank choices, rather than just the reactions of customers.
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Bank Liquidity creation and real economic output
Journal of Banking and Finance, 2017Co-Authors: Allen N Berger, John SedunovAbstract:Abstract We find that Bank Liquidity creation ( LC ) is statistically and economically significantly positively related to real economic output ( GDP ). This is robust to using instrumental variables and many robustness checks. LC also beats Bank assets in “horse races.” On-balance sheet LC matters more for small Banks and off-balance sheet LC matters more for large Banks. Small Bank LC generates more GDP per dollar than large Bank LC , but large Bank LC matters more overall because large Banks provide much more LC than small Banks. The LC -output relation is strongest in Bank-dependent industries, consistent with the hypothesized transmission mechanism.
Christa H S Bouwman - One of the best experts on this subject based on the ideXlab platform.
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Bank Liquidity creation monetary policy and financial crises
Journal of Financial Stability, 2017Co-Authors: Allen N Berger, Christa H S BouwmanAbstract:Abstract This paper examines the interplay among Bank Liquidity creation (which incorporates all Bank on- and off-balance sheet activities), monetary policy, and financial crises. We find that: (1) high Liquidity creation (relative to trend) – particularly off-balance sheet Liquidity creation – helps predict crises, controlling for other factors; (2) monetary policy has statistically significant, but economically minor effects on Liquidity creation by small Banks during normal times, and these effects are even weaker during financial crises; (3) monetary policy has very little effects on medium and large Bank Liquidity creation during both normal times and crises. These findings suggest that authorities may wish to monitor Bank Liquidity creation closely in order to predict and perhaps lessen the likelihood of financial crises. They might also consider other tools to control Bank Liquidity creation, such as capital and Liquidity requirements.
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Bank Liquidity creation following regulatory interventions and capital support
Journal of Financial Intermediation, 2016Co-Authors: Allen N Berger, Christa H S Bouwman, Thomas Kick, Klaus SchaeckAbstract:We study the effects of regulatory interventions and capital support (bailouts) on Banks’ Liquidity creation. We rely on instrumental variables to deal with possible endogeneity concerns. Our key findings, which are based on a unique supervisory German dataset, are that regulatory interventions robustly trigger decreases in Liquidity creation, while capital support does not affect Liquidity creation. Additional results include the effects of these actions on different components of Liquidity creation, lending, and risk taking. Our findings provide new and important insights into the debates about the design of regulatory interventions and bailouts.
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Bank Liquidity creation and financial crises
Elsevier Monographs, 2015Co-Authors: Allen N Berger, Christa H S BouwmanAbstract:Bank Liquidity Creation and Financial Crises delivers a consistent, logical presentation of Bank Liquidity creation and addresses questions of research and policy interest that can be easily understood by readers with no advanced or specialized industry knowledge. Authors Allen Berger and Christa Bouwman examine ways to measure Bank Liquidity creation, how much Liquidity Banks create in different countries, the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, the effects of bailouts, and much more. They also analyze Bank Liquidity creation in the US over the past three decades during both normal times and financial crises. Narrowing the gap between the "academic world" (focused on theories) and the "practitioner world" (dedicated to solving real-world problems), this book is a helpful new tool for evaluating a Bank’s performance over time and comparing it to its peer group. Explains that Bank Liquidity creation is a more comprehensive measure of a Bank’s output than traditional measures and can also be used to measure Bank Liquidity Describes how high levels of Bank Liquidity creation may cause or predict future financial crises Addresses questions of research and policy interest related to Bank Liquidity creation around the world and provides links to websites with data and other materials to address these questions Includes such hot-button topics as the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, and the effects of bailouts
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how can Bank executives financial analysts researchers including academics and students and policy makers including legislators regulators and central Bankers use Bank Liquidity creation data to their advantages
Bank Liquidity Creation and Financial Crises#R##N#New Perspectives, 2015Co-Authors: Allen N Berger, Christa H S BouwmanAbstract:This chapter shows how various parties can use the Bank Liquidity creation data on the book’s website ( http://booksite.elsevier.com/9780128002339 ) to their advantages. Liquidity creation may be used by Bank executives and financial analysts to assess a Bank against its peers and against its own past behavior to pick an appropriate scale of Liquidity creation (in dollar terms and/or relative to assets). Policy makers can use the data in designing legislation, prudential regulation, and supervision. Researchers and policy makers can use the data when investigating the effects of prudential regulation and supervision, as well as monetary policy. Researchers and policy makers can also use the data to investigate many existing and future issues in Banking. The key takeaway is that the Bank Liquidity creation data are useful to a broad audience interested in benchmarking, research, and policy work.
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Bank Liquidity creation monetary policy and financial crises
2012Co-Authors: Allen N Berger, Christa H S BouwmanAbstract:How well does monetary policy affect Bank behavior, particularly during financial crises? What is the role of Banks in creating asset bubbles that burst and lead to crises? We address these issues by focusing on Bank Liquidity creation, a comprehensive measure of Bank output that accounts for all on- and off-balance sheet activities. We find that: (1) during normal times, monetary policy affects Liquidity creation only for small Banks; (2) monetary policy effects are weaker for Banks of all sizes during financial crises; (3) high Liquidity creation (relative to trend) helps predict future crises after controlling for other factors.
Glenn D Rudebusch - One of the best experts on this subject based on the ideXlab platform.
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do central Bank Liquidity facilities affect interBank lending rates
Journal of Business & Economic Statistics, 2009Co-Authors: Jens H E Christensen, Jose A Lopez, Glenn D RudebuschAbstract:In response to the global financial crisis that started in August 2007, central Banks provided extraordinary amounts of Liquidity to the financial system. To investigate the effect of central Bank Liquidity facilities on term interBank lending rates near the start of the crisis, we estimate a six-factor arbitrage-free model of U.S. Treasury yields, financial corporate bond yields, and term interBank rates. This model can account for fluctuations in the term structure of credit and Liquidity spreads observed in the data. A significant shift in model estimates after the announcement of the Liquidity facilities suggests that these central Bank actions did help lower the Liquidity premium in term interBank rates.
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do central Bank Liquidity facilities affect interBank lending rates
Social Science Research Network, 2009Co-Authors: Jens H E Christensen, Jose A Lopez, Glenn D RudebuschAbstract:In response to the severe global credit market dislocations that started in August 2007, central Banks around the world injected extraordinary amounts of Liquidity into the financial system. Using an empirical arbitrage-free term structure model, we investigate the effectiveness of these actions in reducing dollar-denominated interBank lending rates. Our model accounts for fluctuations in the nominal U.S. Treasury yield curve and in the term structure of risk in financial corporate bond yields and term interBank lending rates. Our estimates suggest that central Bank Liquidity facilities did help lower term interBank lending rates.
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do central Bank Liquidity facilities affect interBank lending rates
Research Papers in Economics, 2009Co-Authors: Jens H E Christensen, Jose A Lopez, Glenn D RudebuschAbstract:In response to the global financial crisis that started in August 2007, central Banks provided extraordinary amounts of Liquidity to the financial system. To investigate the effect of central Bank Liquidity facilities on term interBank lending rates, we estimate a six-factor arbitrage-free model of U.S. Treasury yields, financial corporate bond yields, and term interBank rates. This model can account for fluctuations in the term structure of credit risk and Liquidity risk. A significant shift in model estimates after the announcement of the Liquidity facilities suggests that these central Bank actions did help lower the Liquidity premium in term interBank rates.
Paul Klemperer - One of the best experts on this subject based on the ideXlab platform.
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a new auction for substitutes central Bank Liquidity auctions toxic asset auctions and variable product mix auctions
Social Science Research Network, 2009Co-Authors: Paul KlempererAbstract:This paper was revised as: The Product-Mix Auction: a New Auction Design for Differentiated Goods The “Product-Mix Auction” is a single-round auction that can be used whenever an auctioneer wants to sell (or buy) multiple differentiated goods. It allows all participants to express their preferences between varieties, as well as for alternative quantities of specific varieties. Bidders simultaneously make sets of bids. Each of a bidder’s bids can be an "OR” bid that offers a different price for each different variety, and the auction then accepts at most one of the offers from each bid (whichever is best for the bidder given the prices that the auction sets). The graphical solution method makes the operation and merits of the auction easy to explain. The auction is more efficient, and less sensitive to market power, than either running a separate auction for each different variety or running a combined auction with predetermined price differences between varieties. It is also faster, less vulnerable to collusion, and can be easier to use and understand than a simultaneous multiple round auction (SMRA). Moreover, unlike in an SMRA, the auctioneer can specify how the quantities to be sold will depend on the auction prices, by choosing supply functions across varieties. Related material is at www.paulklemperer.org. I invented the auction for the Bank of England when it consulted me at the beginning of the financial crisis in 2007. It now uses it regularly to auction loans of funds secured against different varieties of collateral. The Bank’s first implementation corresponds closely to the description in section 2; the then-Governor, Mervyn King, told the Economist that “[the Product-Mix Auction] is a marvellous application of theoretical economics to a practical problem of vital importance to financial markets” I also advised the Bank on the updated version it introduced in 2014. This permits more dimensions (i.e., more “varieties” of goods), and also allocates an endogenous total quantity. Simple linear-programming methods are now used to solve the auction. The current Governor, Mark Carney, announced plans for greater use of the auction. Future auctions may use others of the enhancements described in section 3. The Guardian newspaper published a 5 minute video including an interview with then-Deputy Governor, Paul Tucker here: www.economics.ox.ac.uk/index.php/General-News/how-geometry-came-to-the-rescue-during-the-Banking-crisis-video
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a new auction for substitutes central Bank Liquidity auctions toxic asset auctions and variable product mix auctions
Research Papers in Economics, 2009Co-Authors: Paul KlempererAbstract:I describe a new static (sealed-bid) auction for multiple substitute goods. As in a two-sided simultaneous multiple round auction (SMRA), bidders bid on multiple assets simultaneously, and bid-takers choose supply functions across assets. The auction yields more efficiency, revenue, information, and trade than running multiple separate auctions, but is often simpler to use and understand, and less vulnerable to collusion, than a SMRA. I designed it after the 2007 Northern Rock Bank run to help the Bank of England fight the credit crunch; in 2008 the U.S. Treasury planned (but later cancelled) using a related design to buy "toxic assets".
Jens H E Christensen - One of the best experts on this subject based on the ideXlab platform.
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do central Bank Liquidity facilities affect interBank lending rates
Journal of Business & Economic Statistics, 2009Co-Authors: Jens H E Christensen, Jose A Lopez, Glenn D RudebuschAbstract:In response to the global financial crisis that started in August 2007, central Banks provided extraordinary amounts of Liquidity to the financial system. To investigate the effect of central Bank Liquidity facilities on term interBank lending rates near the start of the crisis, we estimate a six-factor arbitrage-free model of U.S. Treasury yields, financial corporate bond yields, and term interBank rates. This model can account for fluctuations in the term structure of credit and Liquidity spreads observed in the data. A significant shift in model estimates after the announcement of the Liquidity facilities suggests that these central Bank actions did help lower the Liquidity premium in term interBank rates.
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do central Bank Liquidity facilities affect interBank lending rates
Social Science Research Network, 2009Co-Authors: Jens H E Christensen, Jose A Lopez, Glenn D RudebuschAbstract:In response to the severe global credit market dislocations that started in August 2007, central Banks around the world injected extraordinary amounts of Liquidity into the financial system. Using an empirical arbitrage-free term structure model, we investigate the effectiveness of these actions in reducing dollar-denominated interBank lending rates. Our model accounts for fluctuations in the nominal U.S. Treasury yield curve and in the term structure of risk in financial corporate bond yields and term interBank lending rates. Our estimates suggest that central Bank Liquidity facilities did help lower term interBank lending rates.
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do central Bank Liquidity facilities affect interBank lending rates
Research Papers in Economics, 2009Co-Authors: Jens H E Christensen, Jose A Lopez, Glenn D RudebuschAbstract:In response to the global financial crisis that started in August 2007, central Banks provided extraordinary amounts of Liquidity to the financial system. To investigate the effect of central Bank Liquidity facilities on term interBank lending rates, we estimate a six-factor arbitrage-free model of U.S. Treasury yields, financial corporate bond yields, and term interBank rates. This model can account for fluctuations in the term structure of credit risk and Liquidity risk. A significant shift in model estimates after the announcement of the Liquidity facilities suggests that these central Bank actions did help lower the Liquidity premium in term interBank rates.
