The Liquidity Consequences of the Euro Area Sovereign Debt Crisis


William A. Allen & Richhild Moessner

Published: March 2013


We examine the liquidity effects of the euro area sovereign debt crisis on euro area banks as a group, on intra-euro area financial flows and on international liquidity. The lending capacity of the euro area banking system has been much weakened, despite the remarkable growth of the operations of the Eurosystem, including its greatly increased lending and its intermediation between national central banks in surplus and deficit countries. The euro crisis has also created international liquidity stresses.



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