The Transmission of Liquidity Shocks

The Transmission of Liquidity Shocks
Author :
Publisher : International Monetary Fund
Total Pages : 38
Release :
ISBN-10 : 9781498348393
ISBN-13 : 1498348394
Rating : 4/5 (394 Downloads)

Book Synopsis The Transmission of Liquidity Shocks by : Mr.Philippe D Karam

Download or read book The Transmission of Liquidity Shocks written by Mr.Philippe D Karam and published by International Monetary Fund. This book was released on 2014-11-19 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the transmission of bank-specific liquidity shocks triggered by a credit rating downgrade through the lending channel. Using bank-level data for US Bank Holding Companies, we find that a credit rating downgrade is associated with an immediate and persistent decline in access to non-core deposits and wholesale funding, especially during the global financial crisis. This translates into a reduction in lending to households and non-financial corporates at home and abroad. The effect on domestic lending, however, is mitigated when banks (i) hold a larger buffer of liquid assets, (ii) diversify away from rating-sensitive sources of funding, and (iii) activate internal liquidity support measures. Foreign lending is significantly reduced during a crisis at home only for subsidiaries with weak funding self-sufficiency.

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