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Bank Liquidity Creation and Systemic Risk by Denis Davydov, Sami Vähämaa, Sara Yasar is a nonfiction available to read on EtoBox.

What is Bank Liquidity Creation and Systemic Risk about?

This paper examines the linkage between bank liquidity creation and systemic risk. Usingquarterly data on U.S. bank holding companies from 2003 to 2016, we document thatliquidity creation decreases systemic risk at the individual bank level after controlling forbank size, asset risk, and other bank-specific attributes. After decomposing systemic riskinto bank-specific tail risk and systemic linkage, we find that the riskiness of individualbanks is negatively linked to liquidity creation. Nevertheless, our results also demonstratethat liquidity creation strengthens the systemic linkage of individual banks to severeshocks in the financial system. Overall, our empirical findings demonstrate that the levelof liquidity creation may have important implications for financial stability and theprudential supervision of financial institutions.

Who reads Bank Liquidity Creation and Systemic Risk?

Author

Denis Davydov, Sami Vähämaa, Sara Yasar

Publisher

JEL classification: G21, G28, G32

Published

2020

Language

EN

Category

nonfiction