TY - JOUR
T1 - Crisis Management in Canada
T2 - Analyzing Default Risk and Liquidity Demand during Financial Stress
AU - Allen, Jason
AU - Hortaçsu, Ali
AU - Kastl, Jakub
N1 - Publisher Copyright:
© 2021
PY - 2021
Y1 - 2021
N2 - Using detailed information from the Canadian interbank payments system and liquidity-providing facilities, we find that despite sustained increases in market-rate spreads, the increase in banks’ willingness to pay for liquidity during the 2008–2009 financial crisis was short-lived. Our study suggests that high-frequency distress indicators based on demand for liquidity offered by central banks can be complementary, and perhaps even superior, to market-based indicators, especially during times and in markets where uncertainty in the economic environment may lead to lack of meaningful information in prices due to absence of trading.
AB - Using detailed information from the Canadian interbank payments system and liquidity-providing facilities, we find that despite sustained increases in market-rate spreads, the increase in banks’ willingness to pay for liquidity during the 2008–2009 financial crisis was short-lived. Our study suggests that high-frequency distress indicators based on demand for liquidity offered by central banks can be complementary, and perhaps even superior, to market-based indicators, especially during times and in markets where uncertainty in the economic environment may lead to lack of meaningful information in prices due to absence of trading.
UR - http://www.scopus.com/inward/record.url?scp=85120851299&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85120851299&partnerID=8YFLogxK
U2 - 10.1257/mic.20160287
DO - 10.1257/mic.20160287
M3 - Article
AN - SCOPUS:85120851299
SN - 1945-7669
VL - 13
SP - 243
EP - 275
JO - American Economic Journal: Microeconomics
JF - American Economic Journal: Microeconomics
IS - 2
ER -