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Home > Research > Staff Working Paper No. 586: Systemic illiquidity in the interbank network - Gerardo Ferrara, Sam Langfield, Zijun Liu and Tomohiro Ota
 

Staff Working Paper No. 586: Systemic illiquidity in the interbank network - Gerardo Ferrara, Sam Langfield, Zijun Liu and Tomohiro Ota

08 April 2016

Staff Working Paper No. 586: Systemic illiquidity in the interbank network
Gerardo Ferrara, Sam Langfield, Zijun Liu and Tomohiro Ota

We study systemic illiquidity using a unique data set on UK banks’ daily cash flows, short-term interbank funding and liquid asset buffers. Failure to roll-over short-term funding or repay obligations when they fall due generates an externality in the form of systemic illiquidity. We simulate a model in which systemic illiquidity propagates in the interbank funding network over multiple days. In this setting, we show that systemic illiquidity is minimised by a macroprudential policy that skews the distribution of liquid assets towards banks that are important in the network.

August 2017

This is an updated version of the Staff Working Paper originally published on 8 April 2016.
Systemic illiquidity in the interbank network
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