Understand funding liquidity and market liquidity in a regime‐switching model
研究了融资流动性与公司债券市场流动性在马尔可夫体制转换模型中的时变关系，发现两者在货币市场紧张和股市波动时相互正向影响大，而在正常时期融资流动性对市场流动性有较小的负向影响。
Abstract We investigate the time‐varying relationship of funding liquidity (FL) and market liquidity (ML) in a Markov regime‐switching model. By using a comprehensive U.S. TRACE dataset, we provide strong evidence that FL and corporate bond ML are interlinked, and their impact on each other is highly regime‐dependent. We find that FL and ML exhibit a large‐and‐positive mutual impact when money market is tight and equity market is volatile. But in normal regimes, FL is found to have a negative impact on ML with a much smaller magnitude than those in stressed regimes. Furthermore, FL is more stable than ML with less regime changes. Our article offers insight on the important mechanism by which central banks can improve ML through the funding market.