NY Fed paper studies Treasury liquidity crunches


A staff report published by the Federal Reserve Bank of New York in December examines the price volatility and liquidity of US Treasury markets during the global financial crisis.

The report's authors, Robert Engle, Michael Fleming, Eric Ghysels and Giang Nguyen, employ a "new class" of dynamic order book models in their analysis, finding a negative feedback relationship between Treasury price volatility and liquidity, which "becomes more pernicious" during a crisis.

The authors also find that

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