Journal Article

Literature review on the stability of funding models

Abstract: Financial intermediaries have an important role as liquidity providers?they perform maturity and liquidity transformation by issuing liquid, short-term liabilities while holding illiquid, long-term assets. But there is an inherent fragility associated with this role. This article provides a review of the economics literature on the stability of banks and other financial intermediaries, with a policy-oriented focus on their funding models. Yorulmazer employs the standard framework used in the literature to examine the fragility of intermediaries that conduct maturity and liquidity transformation. He then considers potential factors that make them more or less stable. Developments in the financial sector that may have affected the stability of funding models are also discussed.

Keywords: maturity transformation; bank run; liquidity transformation;

JEL Classification: G21; G01;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Economic Policy Review

Publication Date: 2014

Issue: Feb

Pages: 3-16