Abstract
The joint existence of a lender of last resort and of a stock market is usually considered the sign of a developed financial infrastructure. This paper analyzes whether a securities market may play a role similar to that of a lender of last resort by being of assistance to a bank, which faces possible liquidity shortages. We examine which of these two institutions best prevents a bank's liquidity shortages while allowing the optimal allocation of the bank's resources. Our results suggest that securities markets matter more for the liquidity of banks than a lender of last resort.
| Original language | English |
|---|---|
| Pages (from-to) | 60-77 |
| Number of pages | 18 |
| Journal | International Review of Economics and Finance |
| Volume | 16 |
| Issue number | 1 |
| DOIs | |
| State | Published - 2007 |
| Externally published | Yes |
Keywords
- Financial markets
- Lender of last resort
- Liquidity risk