Some lessons on liquidity

The price a bank pays for liquidity depends upon the liquidity positions of its rivals as well as its own, research from the Bundesbank finds.

A greater imbalance in liquidity positions across banks is associated with a rise in the price of liquidity, relative to the benchmark, the research states.

The research studies differences in the price paid for liquidity across banks using price data at the individual bank level, including information on banks' reserve requirements and reserve holdings


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