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An Index of Bank Liquidity Creation: An Application to the Banking Systems of the Eurozone and the Liquidity Policy of the ECB during the Euro Crisis

In: Lending, Investments and the Financial Crisis

Author

Listed:
  • Pierluigi Morelli
  • Giovanni B. Pittaluga
  • Elena Seghezza

Abstract

The main function of banks is maturity transformation. By performing this function banks create liquidity. They lend illiquid loans to borrowers of funds, and in the face of these they emit liabilities which may be withdrawn at any time at par value (Bryant, 1980; Diamond and Dybvig, 1983; Holmstrom and Tirole, 1998).

Suggested Citation

  • Pierluigi Morelli & Giovanni B. Pittaluga & Elena Seghezza, 2015. "An Index of Bank Liquidity Creation: An Application to the Banking Systems of the Eurozone and the Liquidity Policy of the ECB during the Euro Crisis," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Elena Beccalli & Federica Poli (ed.), Lending, Investments and the Financial Crisis, chapter 6, pages 134-156, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-1-137-53101-8_6
    DOI: 10.1057/9781137531018_6
    as

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