大阪大学　数理・データ科学教育研究センター
Center for Mathematical Modeling and Data Science,Osaka University

The interaction between funding liquidity and market liquidity - Evidence from subprime and European crisis

竹山梓 (日本銀行)

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4. The interaction between funding liquidity and market liquidity - Evidence from subprime and European crisis

大阪大学 数理・データ科学セミナー 金融・保険セミナーシリーズ 第63回

The interaction between funding liquidity and market liquidity - Evidence from subprime and European crisis

竹山梓 (日本銀行)

This paper explores the interaction between funding liquidity and market liquidity. The simultaneous dry-up of funding and market liquidity was often observed in financial crises. While Brunnermeier and Pedersen (2009) explain this phenomenon by an unintended destabilization effect of the function to stabilize financial markets such as margin call due to uninformed traders' behavior under uncertainty, Nyborg and Ostberg (2014) claim that the dysfunction of interbank funding markets causes the decline in market liquidity in broad financial markets. We demonstrate that Brunnermeier and Pedersen's mechanism is dominant during subprime financial crisis while both hypotheses are valid during European sovereign debt crisis using the structural VAR model.