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2016-10-26Diskussionspapier DOI: 10.18452/18418
Information Acquisition and Liquidity Dry-Ups
dc.contributor.authorKoenig, Philipp
dc.contributor.authorPothier, David
dc.date.accessioned2017-09-27T13:43:15Z
dc.date.available2017-09-27T13:43:15Z
dc.date.issued2016-10-26
dc.identifier.urihttp://edoc.hu-berlin.de/18452/19095
dc.description.abstractWe analyze a novel feedback mechanism between market and funding liquidity that causes self-fulfilling liquidity dry-ups. Financial firms facing funding withdrawals have an incentive to acquire information about their assets. Those with good assets gain by resorting to outside liquidity sources and withhold assets from secondary markets. This leads to adverse selection and lowers market prices. If prices fall by enough, funding withdrawals are amplified and market and funding illiquidity become mutually reinforcing. We compare different policy measures that can mitigate the risk of ineficient liquidity dry-ups. While outright debt purchases can implement the eficient allocation, liquidity injections may backfire and exacerbate adverse selection.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/
dc.subjectInformation Acquisitioneng
dc.subjectMarket Liquidityeng
dc.subjectFinancial Criseseng
dc.subject.ddc330 Wirtschaft
dc.titleInformation Acquisition and Liquidity Dry-Ups
dc.typeworkingPaper
dc.identifier.urnurn:nbn:de:kobv:11-110-18452/19095-4
dc.identifier.doihttp://dx.doi.org/10.18452/18418
local.edoc.container-titleSonderforschungsbereich 649: Ökonomisches Risiko
local.edoc.pages56
local.edoc.type-nameDiskussionspapier
local.edoc.institutionWirtschaftswissenschaftliche Fakultät
local.edoc.container-typeseries
local.edoc.container-type-nameSchriftenreihe
local.edoc.container-volume2016
local.edoc.container-issue45
local.edoc.container-erstkatid2195055-6

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