Financial Integration and Liquidity Crises
comunitat-uji-handle:10234/9
comunitat-uji-handle2:10234/8643
comunitat-uji-handle3:10234/8644
comunitat-uji-handle4:
INVESTIGACIONAquest recurs és restringit
https://doi.org/10.1287/mnsc.2017.2841 |
Metadades
Títol
Financial Integration and Liquidity CrisesData de publicació
2019-03Editor
InformsISSN
0025-1909Cita bibliogràfica
CASTIGLIONESI, Fabio; FERIOZZI, Fabio; LORENZONI, Guido. Financial integration and liquidity crises. Management Science, 2019, vol. 65, no 3, p. 955-975.Tipus de document
info:eu-repo/semantics/articleVersió de l'editorial
https://pubsonline.informs.org/doi/10.1287/mnsc.2017.2841Versió
info:eu-repo/semantics/publishedVersionResum
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 ... [+]
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. [-]
Publicat a
Management Science, 2019, 65, 3Entitat finançadora
Ministerio de Economía y Competitividad de España
Codi del projecte o subvenció
ECO2014-59491-P
Drets d'accés
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