Our website will undergo scheduled maintenance on March 6th, 2024. During this time, connection to our website and some of its features may be unavailable. Thank you for your patience, and we apologize for any inconvenience.

Working Paper

Liquidity Funding Shocks : The Role of Banks' Funding Mix


Abstract: This study attempts to evaluate the impact of an increase in banks' funding stress and its transmission to the real economy, taking into account different funding sources banks can rely on. Using aggregate data from eight Euro area financial systems, we find that following a liquidity funding shock, both credit and GDP decline in different amounts and lengths. GDP reverts faster than credit. Furthermore, periphery countries experience a more pronounced fall in deposits and credit growth and the negative effects from the shock last longer than in core countries. Banks' funding seems to play a relevant role as periphery countries rely more on wholesale funding during normal times.

Keywords: Liquidity funding shocks; ECB policy; Euro Area;

JEL Classification: E50; E58; F45;

https://doi.org/10.17016/IFDP.2019.1245

Access Documents

File(s): File format is application/pdf https://www.federalreserve.gov/econres/ifdp/files/ifdp1245.pdf

Authors

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 2019-04-22

Number: 1245

Pages: 37 pages