Essays on Financial Stability

Abstract

This thesis consists of three chapters that analyze the stability of financial institutions. The focus lies on self-fulfilling liquidity crises that are associated with maturity transformation conducted by financial intermediaries such as banks. The first chapter shows that the government has a distinct role in ensuring the functioning and stability of efficient maturity transformation. The second chapter shows that if a single government's power is limited, supranational agreements can help to mitigate this limitation. The third chapter addresses the financial fragility that may arise when agents circumvent regulation. It is argued that a deposit insurance may fail to prevent panic-based runs if regulatory arbitrage is possible.