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I construct a systemic liquidity risk index (SLRI) from data on violations of arbitrage relationships across several asset classes between 2004 and 2010. Then I test whether the equity returns of 53 global banks were exposed to this liquidity risk factor. Results show that the level of bank returns is not directly affected by the SLRI, but their volatility increases when liquidity conditions deteriorate. I do not find a strong association between bank size and exposure to the SLRI - measured as the sensitivity of volatility to the index. Surprisingly, exposure to systemic liquidity risk is positively associated with the Net Stable Funding Ratio (NSFR). The link between equity volatility and the SLRI allows me to calculate the cost that would be borne by public authorities for providing liquidity support to the financial sector. I use this information to estimate a liquidity insurance premium that could be paid by individual banks in order to cover for that social cost.

Liquidity (Economics) --- Bank liquidity. --- Assets, Frozen --- Frozen assets --- Finance --- Banks and Banking --- Finance: General --- Financial Econometrics --- Financial Crises --- Contingent Pricing --- Futures Pricing --- option pricing --- Portfolio Choice --- Investment Decisions --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: Government Policy and Regulation --- Financial Institutions and Services: Government Policy and Regulation --- Financial services law & regulation --- Banking --- Liquidity --- Liquidity risk --- Liquidity indicators --- Systemic risk --- Asset and liability management --- Financial regulation and supervision --- Liquidity management --- Financial sector policy and analysis --- Liquidity requirements --- Economics --- Financial risk management --- Banks and banking --- State supervision --- United States --- Option pricing

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The paper investigates how changes in industries' funding costs affect total factor productivity (TFP) growth. Based on panel regressions using 31 U.S. and Canadian industries between 1991 and 2007, and using industries' dependence on external funding as an identification mechanism, we show that increases in the cost of funds have a statistically significant and economically meaningful negative impact on TFP growth. This finding cannot be explained by either increasing returns to scale or factor hoarding, as results are not sensitive to controlling for industry size and our calculations account for changes in factor utilization. Based on a stylized theoretical model, the estimates suggest that financial shocks distort the allocation of factors across firms even within an industry, reducing its TFP. The decline in productivity growth accounts for a large fraction of the negative impact of funding costs on output.

Business & Economics --- Economic Theory --- Business cycles. --- Industrial productivity. --- Financial crises. --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Productivity, Industrial --- TFP (Total factor productivity) --- Total factor productivity --- Economic cycles --- Economic fluctuations --- Crises --- Industrial efficiency --- Production (Economic theory) --- Cycles --- Investments: Bonds --- Production and Operations Management --- Macroeconomics: Production --- Business Fluctuations --- Financial Markets and the Macroeconomy --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- General Financial Markets: General (includes Measurement and Data) --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Macroeconomics --- Investment & securities --- Corporate bonds --- Productivity --- Capital productivity --- Bond yields --- Financial institutions --- Industrial productivity --- Bonds --- United States

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We analyze an overlapping generations economy with financial frictions and accumulation of both physical and intangible capital. The key difference between them is that intangible capital cannot be used as collateral for borrowing. As intangibles become more important in production, financial frictions tighten and equilibrium interest rates decline, creating the conditions for the emergence of rational bubbles. We also analyze the question of dynamic efficiency, demonstrating that, in the presence of financial frictions, neither the interest rate test nor the test proposed by Abel et al. (1989) are appropriate. Finally we show that, in general, rational bubbles are not Pareto improving in our framework.

Business cycles --- Intangible property --- Capital --- Assets (Accounting) --- Asset requirements --- Capital assets --- Fixed assets --- Economics --- Capitalism --- Infrastructure (Economics) --- Wealth --- Incorporeal property --- Intangible assets --- Intangibles --- Property --- Econometric models. --- Prices --- Law and legislation --- Financial Risk Management --- Investments: General --- Labor --- Macroeconomics --- Investment --- Intangible Capital --- Capacity --- Financial Markets and the Macroeconomy --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Technological Change: Choices and Consequences --- Diffusion Processes --- Economic Growth and Aggregate Productivity: General --- Labor Demand --- Financial Crises --- Labor Economics: General --- Labour --- income economics --- Economic & financial crises & disasters --- Intangible capital --- Self-employment --- Capital accumulation --- Asset bubbles --- National accounts --- Financial crises --- Saving and investment --- Self-employed --- Labor economics --- United States --- Income economics