Michael Beauregard Seminar in Macroeconomics: U.S. Banks and Global Liquidity
Wenxin Du, University of Chicago Booth School of Business
Wednesday, October 20, 2021
4:00-5:30 PM
Virtual
Abstract: We document a new intermediation method, “reserve-draining intermediation”, which has been dominant in global banks’ provision of dollar liquidity post-Global Financial Crisis. Using daily supervisory data, we show that large U.S. banks use their excess reserves at the Federal Reserve to finance short-term lending in the repo and foreign exchange swap markets in response to dollar funding shortages. Intra-firm liquidity sharing between depository institutions and broker-dealer subsidiaries within the same bank holding company are crucial to reserve-draining intermediation. Our results highlight the importance of a large Federal Reserve balance sheet even when interest rates are above the zero-lower bound.
| Building: | Off Campus Location |
|---|---|
| Location: | Virtual |
| Event Type: | Workshop / Seminar |
| Tags: | Economics, seminar |
| Source: | Happening @ Michigan from Department of Economics, Michael Beauregard Seminar in Macroeconomics |
