54 posts on "liquidity"
July 7, 2026
What Do Over 3,000 Bank Runs Teach Us About Banking Crises?
Runs on financial institutions are one of the salient markers of financial crises. But the role of runs in crises is a topic of longstanding debate. Runs can be seen as the key turning point, whereby even small shocks can generate severe crises with widespread bank failures. Another view is that runs are mainly a symptom of deeper rot in the financial system, exacerbating crises rather than being their primary cause. Understanding this debate has first order implications for how to think about financial crises and the appropriate policy responses. In this post, we use a new database of more than 3,000 bank runs (introduced in our companion post) to show that poor fundamentals are central to explaining both when runs occur and when they have severe economic effects. We argue that this evidence tempers the view that small shocks can have outsized real effects through self-fulfilling run dynamics.
Posted at 10:01 am in Artificial Intelligence (AI), Banks, Crisis, Liquidity | Permalink | Comments (1)
Using AI to Let History Speak About Bank Runs
Banking crises are commonly associated with bank runs and banking panics, yet our empirical understanding of bank runs is constrained by a lack of bank-level data. In a new paper, we use large language models (LLMs) to extract information on bank runs from millions of digitized historical newspaper pages, creating the most comprehensive database of bank runs in U.S. history. Every bank run episode that we identify is documented on a companion website where users can browse and examine individual episodes, and read the original newspaper articles. In this post, we describe how we built this dataset and discuss what its basic features reveal.
Posted at 10:00 am in Artificial Intelligence (AI), Banks, Crisis, Liquidity | Permalink | Comments (0)
June 30, 2026
Liquidity Fades as Treasuries Age
More than $30 trillion U.S. Treasury debt is outstanding. Less than 4 percent of this amount, which is associated with the most recently issued Treasuries, called on-the-run securities, accounts for 65 percent of average daily trading volume. The remaining portion of the amount outstanding is accounted for by seasoned issues that have been replaced by newer benchmarks, which are referred to as off-the-run securities. In this post, we review the key results in our paper that uses transaction-level Treasury TRACE data to study how trading activity and liquidity evolve as securities move from on-the-run to off-the-run. We show three main patterns. First, off-the-run notes and bonds rely much more on dealer-to-customer intermediation than benchmark securities. Second, trading activity falls sharply and transaction costs increase as securities age. Third, securities that are cheapest to deliver into Treasury futures are an important exception: they trade more actively than other off-the-run bonds of similar age.
April 16, 2026
Bank Failures: The Roles of Solvency and Liquidity
Do banks fail because of runs or because they become insolvent? Answering this question is central to understanding financial crises and designing effective financial stability policies. Long-run historical evidence reveals that the root cause of bank failures is usually insolvency. The importance of bank runs is somewhat overstated. Runs matter, but in most cases they trigger or accelerate failure at already weak banks, rather than cause otherwise sound banks to fail.
April 2, 2026
Treasury Market Liquidity Since April 2025
In this post, we examine the evolution of U.S. Treasury market liquidity over the past year, which has witnessed myriad economic and political developments. Liquidity worsened markedly one year ago as volatility increased following the announcement of higher-than-expected tariffs. Liquidity quickly improved when the tariff increases were partially rolled back and then remained fairly stable thereafter (through the end of our sample in February 2026), including after the recent Supreme Court decision striking down the emergency tariffs and the subsequent announcement of new tariffs.
November 12, 2025
How Has Treasury Market Liquidity Fared in 2025?
In 2025, the Federal Reserve has cut interest rates, trade policy has shifted abruptly, and economic policy uncertainty has increased. How have these developments affected the functioning of the key U.S. Treasury securities market? In this post, we return to some familiar metrics to assess the recent behavior of Treasury market liquidity. We find that liquidity briefly worsened around the April 2025 tariff announcements but that its relation to Treasury volatility has been similar to what it was in the past.
October 1, 2024
Are Nonbank Financial Institutions Systemic?
Recent events have heightened awareness of systemic risk stemming from nonbank financial sectors. For example, during the COVID-19 pandemic, liquidity demand from nonbank financial entities caused a “dash for cash” in financial markets that required government support. In this post, we provide a quantitative assessment of systemic risk in the nonbank sectors. Even though these sectors have heterogeneous business models, ranging from insurance to trading and asset management, we find that their systemic risk has common variation, and this commonality has increased over time. Moreover, nonbank sectors tend to become more systemic when banking sector systemic risk increases.
September 24, 2024
End‑of‑Month Liquidity in the Treasury Market
Trading activity in benchmark U.S. Treasury securities now concentrates on the last trading day of the month. Moreover, this stepped-up activity is associated with lower transaction costs, as shown by a smaller price impact of trades. We conjecture that increased turn-of-month portfolio rebalancing by passive investment funds that manage relative to fixed-income indices helps explain these patterns.
August 12, 2024
Reallocating Liquidity to Resolve a Crisis
Shortly after the collapse of Silicon Valley Bank (SVB) in March 2023, a consortium of eleven large U.S. financial institutions deposited $30 billion into First Republic Bank to bolster its liquidity and assuage panic among uninsured depositors. In the end, however, First Republic Bank did not survive, raising the question of whether a reallocation of liquidity among financial institutions can ever reduce the need for central bank balance sheet expansion in the fight against bank runs. We explore this question in this post, based on a recent working paper.
February 12, 2024
Measuring Treasury Market Depth
A commonly used measure of market liquidity is market depth, which refers to the quantity of securities market participants are willing to buy or sell at particular prices. The market depth of U.S. Treasury securities, in particular, is assessed in many analyses of market functioning, including this Liberty Street Economics post on liquidity in 2023, this article on market functioning in March 2020, and this paper on liquidity after the Global Financial Crisis. In this post, we review the many measurement decisions that go into depth calculations and show that inferences about the evolution of Treasury market depth, and hence liquidity, are largely invariant with respect to these decisions.
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