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Liquidity risk, market power and the informational effects of policy

Author

Listed:
  • Grégory Claeys

    (CNAM - Conservatoire National des Arts et Métiers [CNAM], LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM])

  • Chara Papioti

    (UPF - Universitat Pompeu Fabra [Barcelona])

  • Andreas Tryphonides

    (University of Cyprus = Université de Chypre)

Abstract
Using a structural approach, we combine bidding data from open market operations with macroeconomic information to recover the latent distribution of liquidity risk across financial institutions in Chile and how it is affected by policy. We find that unanticipated shocks to foreign reserve accumulation and interest rates have significant effects on aggregate beliefs about a liquidity shock in the near future. We demonstrate that accounting for market power is important for measuring the strength of this informational channel of macroeconomic policy.

Suggested Citation

  • Grégory Claeys & Chara Papioti & Andreas Tryphonides, 2023. "Liquidity risk, market power and the informational effects of policy," Post-Print hal-04164592, HAL.
    • Handle: RePEc:hal:journl:hal-04164592
    DOI: 10.1016/j.jinteco.2023.103732
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    More about this item

    Keywords

    Multi-unit auction; Liquidity risk; Signalling effects of macroeconomic policy;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F30 - International Economics - - International Finance - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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