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Working Paper
Balancing Before and After: Treasury Market Reform Proposals and the Connections Between Ex-Ante and Ex-Post Liquidity Tools
This paper develops a simple framework that helps to draw out some of the potential connections between ex-ante liquidity risk management tools such as liquidity requirements or mandatory fees and ex-post liquidity tools such as a lender of last resort. A central message of this analysis is that policy actions that expand the lender of last resort function so as to better address periods of financial distress are likely to be most effective when accompanied by regulations or other mechanisms that encourage socially-responsible ex-ante liquidity risk management on the part of financial firms. ...