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Journal Article
Literature review on the stability of funding models
Financial intermediaries have an important role as liquidity providers?they perform maturity and liquidity transformation by issuing liquid, short-term liabilities while holding illiquid, long-term assets. But there is an inherent fragility associated with this role. This article provides a review of the economics literature on the stability of banks and other financial intermediaries, with a policy-oriented focus on their funding models. Yorulmazer employs the standard framework used in the literature to examine the fragility of intermediaries that conduct maturity and liquidity ...
Working Paper
Central Bank Digital Currency: Central Banking for All?
The introduction of a central bank digital currency (CBDC) allows the central bank to engage in large-scale intermediation by competing with private financial interme-diaries for deposits. Yet, since a central bank is not an investment expert, it cannot invest in long-term projects itself, but relies on investment banks to do so. We derive an equivalence result that shows that absent a banking panic, the set of allocations achieved with private financial intermediation will also be achieved with a CBDC. Dur-ing a panic, however, we show that the rigidity of the central bank’s contract ...