Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5101473 | Journal of Monetary Economics | 2017 | 40 Pages |
Abstract
We study the impact of the Basel III liquidity coverage ratio (LCR) on interbank interest rates in an otherwise-standard model of monetary policy implementation. When banks face the possibility of an LCR shortfall, the overnight interest rate tends to decrease, while a regulatory premium arises in longer-term rates. In addition, the LCR requirement can substantially alter the effect of a central banks' open market operations on equilibrium interest rates.
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Authors
Morten Bech, Todd Keister,