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Journal of Financial Services Research

, Volume 55, Issue 2–3, pp 167–190 | Cite as

Liquidity Funding Shocks: the Role of Banks’ Funding Mix

  • Antonio ÁlvarezEmail author
  • Alejandro Fernández
  • Joaquín García-Cabo
  • Diana Posada
Article
  • 43 Downloads

Abstract

This study attempts to evaluate the impact of an increase in banks’ funding stress and its transmission to the real economy, taking into account different funding sources banks can rely on. Using aggregate data from eight Euro area financial systems, we find that following a liquidity funding shock, both credit and GDP decline in different amounts and lengths. GDP reverts faster than credit. Furthermore, periphery countries experience a more pronounced fall in deposits and credit growth and the negative effects from the shock last longer than in core countries. Banks’ funding seems to play a relevant role as periphery countries rely more on wholesale funding during normal times.

Keywords

Liquidity funding shocks ECB policy Panel VAR 

JEL Classification

E50 E58 F45 

Notes

Acknowledgments

The authors would like to thank participants at the 6th International Conference of the Financial Engineering and Banking Society for helpful discussions. We also thank two anonymous referees as well as the invited editor Ned Prescott for their insightful comments. Finally, we are grateful to Marta González Escalonilla for excellent research assistance.

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Copyright information

© This is a U.S. Government work and not under copyright protection in the US; foreign copyright protection may apply 2019

Authors and Affiliations

  1. 1.Universidad de OviedoOviedoSpain
  2. 2.LiberbankMadridSpain
  3. 3.Federal Reserve BoardWashingtonUSA
  4. 4.Analistas Financieros InternacionalesMadridSpain

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