Discussion paper

DP16528 On the Instability of Private Intertemporal Liquidity Provision

We establish that the provision of intertemporal liquidity is fundamentally prone to instability. Not only are banks subject to coordination failures but also asset markets are inherently unstable. These findings challenge the notion of optimal private provision of liquidity.

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Citation

Dietrich, D and T Gehrig (eds) (2021), “DP16528 On the Instability of Private Intertemporal Liquidity Provision”, CEPR Press Discussion Paper No. 16528. https://new.cepr.org/publications/dp16528