Transmission of Liquidity Shocks: Evidence from the 2007 Subprime Crisis
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Summary:
We examine the linkages between market and funding liquidity pressures, as well as their interaction with solvency issues surrounding key financial institutions during the 2007 subprime crisis. A multivariate GARCH model is estimated in order to test for the transmission of liquidity shocks across U.S. financial markets. It is found that the interaction between market and funding illiquidity increases sharply during the recent period of financial turbulence, and that bank solvency becomes important.
Series:
Working Paper No. 2008/200
Subject:
Banking Financial crises Liquidity Liquidity risk Stock markets
English
Publication Date:
August 1, 2008
ISBN/ISSN:
9781451870589/1018-5941
Stock No:
WPIEA2008200
Pages:
21
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