2008
19/2008
Liquidity matters: Evidence from the Russian interbank market
Kirjoittaja(t): Alexei Karas, Koen Schoors and Gleb Lanine
2008. 27 pages/sivua.
Julkaisija: Suomen Pankki
ISBN 978-952-462-929-4 (verkkojulkaisu)
Hakusanat: interbank market stability, contagion, liquidity channel, lender of last resort, Russia, C8, G21, Alexei Karas, Koen Schoors, Gleb Lanine
We suggest an additional transmission channel of contagion on the interbank market - the liquidity channel. Examining the Russian banking sector, we and that the liquidity channel contributes significantly to understanding and predicting interbank market crises. Interbank market stability Granger causes the interbank market structure, while the opposite causality is rejected. This bolsters the view that the interbank market structure is endogenous. The results corroborate the thesis that prudential regulation at the individual bank level is insufficient to prevent systemic crises. We demonstrate that liquidity injections of a classical lender of last resort can effectively mitigate coordination failures on the interbank market both in theory and practice. Apparently, liquidity does matter.