Liquidity in the banking sector.

Summary As a determinant of a bank's survival during the 2007/2008 financial crisis, liquidity in the banking sector has since recently been a challenge for the financial and academic communities. The three papers presented in this thesis focus on the two main facets of liquidity in the banking sector: the holding of liquid assets (i.e., cash and cash equivalents) and the process of creating liquidity in banks used to fund loans. As will be discussed in the articles, these two aspects of liquidity can be seen as two sides of the same coin. I recognize that liquidity in the banking sector is related to money creation. however, this thesis focuses on the aforementioned two aspects of liquidity. First, this introduction presents how the concept of liquidity has evolved in mainstream economic thinking. The second section considers the revival of cash holding that has been observed since the 2007/2008 financial crisis in the banking sector. The third section examines the properties of liquidity. The fourth section explores what we do not know about liquidity. The fifth section identifies and selects three fundamental problems related to liquidity that are analyzed in the three papers presented in this thesis. The sixth and final section presents the methodology used in the three papers to answer these questions.