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Liquidity Regulation: Rationales, Benefits and Costs

Published online by Cambridge University Press:  01 January 2020

Gianni De Nicolò*
Affiliation:
International Monetary Fund and CESifo

Abstract

This paper reviews the market failures that may justify the need for liquidity regulation, assesses whether liquidity regulation is a necessary complement to Lender of Last Resort (LOLR) policies, capital regulation and prompt corrective action, surveys the available evidence on the net benefits of liquidity regulation, and concludes by outlining research directions useful to improve bank regulation design.

Type
Research Articles
Copyright
Copyright © 2016 National Institute of Economic and Social Research

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Footnotes

The views expressed in this paper are exclusively those of the author and do not necessarily represent those of the IMF or IMF policy.

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