Abstract
We examine the effect of liquidity imbalances on liquidity risk using 224 bank exits from interbank markets between 1994 and 2014 in 54 emerging and developed countries. We find that bank exits from interbank markets decrease bank liquidity, especially when net placers exit an interbank market. Moreover, we also show that banks try to improve their position by selling the most liquid assets, which due to the limited capital on the market leads to a liquidity crunch. Finally, we find that a liquidity imbalance adversely affects the bank credit supply. Our findings suggest that the consequences are more severe for emerging countries than for developed countries and in pre-crisis periods.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
