Liquidity and Crises

by Allen, Franklin; Carletti, Elena; Krahnen, Jan Pieter; Tyrell, Marcel

• ISBN13: 9780195390711
• ISBN10: 0195390717
• Format: Paperback
• Copyright: 2011-01-21
• Publisher: Oxford University Press

Summary

Financial crises have been pervasive for many years. Their frequency in recent decades has been double that of the Bretton Woods Period (1945-1971) and the Gold Standard Era (1880-1993), comparable only to the period during the Great Depression. Nevertheless, the financial crisis that started in the summer of 2007 came as a great surprise to most people. What initially was seen as difficulties in the U.S. subprime mortgage market, rapidly escalated and spilled over first to financial markets and then to the real economy. The crisis changed the financial landscape worldwide, and its full costs are yet to be evaluated.

Author Biography

Franklin Allen is the Nippon Life Professor of Finance and Professor of Economics at the Wharton School of the University of Pennsylvania. He has been on the faculty since 1980. He is currently Co-Director of the Wharton Financial Institutions Center. He is a past President of the American Finance Association.

Elena Carletti is Professor of Economics at the European University Institute and Joint Chair of the Economics Department and Robert Schuman Center for Advanced Studies.

Jan Pieter Krahnen is Chair of Corporate Finance at Johann Wolfgang Goethe-University Frankfurt.

Marcel Tyrell is Professor of Entrepreneurship & Finance at Zeppelin University, Friedrichshafen

Table of Contents

An Introduction to Liquidity and Crises	p. 3
Liquidity and Interbank Markets	p. 33
Preference Shocks, Liquidity, and Central Bank Policy	p. 35
Endogenous Liquidity in Asset Markets	p. 51
Financial Intermediaries and Markets	p. 78
Financial Fragility, Liquidity, and Asset Prices	p. 111
Interbank Market Integration under Asymmetric Information	p. 139
Banks as Monitors of Other Banks: Evidence from the Overnight Federal Funds Market	p. 168
Public Provision of Liquidity and Regulation	p. 189
Private and Public Supply of Liquidity	p. 191
Liquidity, Efficiency, and Bank Bailouts	p. 221
Financial Crises, Payment System Problems, and Discount Window Lending	p. 252
Liquidity, Risk Taking, and the Lender of Last Resort	p. 270
Coordination Failures and the Lender of Last Resort: Was Bagehot Right After All?	p. 293
Competition among Regulators and Credit Market Integration	p. 320
Money, Liquidity Crises and Asset Prices	p. 347
Money in a Theory of Banking	p. 349
Liquidity and Asset Prices	p. 377
Collateral Constraints in a Monetary Economy	p. 406
Inefficient Credit Booms	p. 436
Contagion Effects in Financial Crises	p. 465
Financial Contagion through Capital Connections: A Model of the Origin and Spread of Bank Panics	p. 467
Information Contagion and Bank Herding	p. 497
Cash in-the-Market Pricing and Optimal Resolution of Bank Failures	p. 512
Credit Risk Transfer and Contagion	p. 544
Estimating Bilateral Exposures in the German Interbank Market: Is There a Danger of Contagion?	p. 566
Financial Crises and Currency Crises	p. 587
Asset Market Linkages in Crisis Periods	p. 589
Strategic Complementarities and the Twin Crises	p. 614
Inefficient Foreign Borrowing: A Dual- and Common-Agency Perspective	p. 635
Exchange Rate Volatility and the Credit Channel in Emerging Markets: A Vertical Perspective	p. 666
Index	p. 693
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