Market Liquidity after the Financial Crisis

Posted: 3 Jan 2018

See all articles by Tobias Adrian

Tobias Adrian

International Monetary Fund

Michael J. Fleming

Federal Reserve Bank of New York

Or Shachar

Federal Reserve Bank of New York

Erik Vogt

Federal Reserve Bank of New York

Multiple version iconThere are 3 versions of this paper

Date Written: November 2017

Abstract

This article examines market liquidity in the postcrisis era in light of concerns that regulatory changes might have reduced dealers’ ability and willingness to make markets. We begin with a discussion of the broader trading environment, including an overview of regulations and their potential effects on dealer balance sheets and market making, but also considering additional drivers of market liquidity. We document a stagnation of dealer balance sheets after the financial crisis of 2007–2009, which occurred concurrently with dealer balance sheet deleveraging. However, using high-frequency trade and quote data for US Treasuries and corporate bonds, we find only limited evidence of a deterioration in market liquidity.

Suggested Citation

Adrian, Tobias and Fleming, Michael J. and Shachar, Or and Vogt, Erik, Market Liquidity after the Financial Crisis (November 2017). Annual Review of Financial Economics, Vol. 9, pp. 43-83, 2017. Available at SSRN: https://ssrn.com/abstract=3095955 or http://dx.doi.org/10.1146/annurev-financial-110716-032325

Tobias Adrian (Contact Author)

International Monetary Fund ( email )

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HOME PAGE: http://www.tobiasadrian.com

Michael J. Fleming

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-6372 (Phone)
212-720-1582 (Fax)

HOME PAGE: http://www.newyorkfed.org/research/economists/fleming/

Or Shachar

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6974 (Phone)
(212) 720-1582 (Fax)

Erik Vogt

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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