Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212103 
Authors: 
Year of Publication: 
2008
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 12/2008
Publisher: 
Bank of Finland, Helsinki
Abstract: 
In this paper, I develop a model that addresses the links between banks liquidity outlook and their incentives to take credit risk. Assuming that both bank-specific liquidity shocks and credit losses are necessary to provoke bank runs, the model predicts that a bank s incentives to mitigate its credit risk by screening decrease if the probability of a bank-specific liquidity shock declines. This suggests that the benign liquidity outlook prevailing prior to the subprime crisis may have contributed to the lack of screening by banks that has been an important causal factor in the crisis.
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-441-1
Document Type: 
Working Paper

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