This is the manuscript of the Baffi Lecture that I delivered at Banca d’Italia in September 2017. I address the implications for financial-market liquidity of post-crisis capital and failureresolution rules for systemically important banks. I focus especially on over-the-counter (OTC) markets, which handle most of the world’s trade in bonds, repos, swaps, commodities, and foreign exchange.

We show how the current institutional setting of U.S.-dollar money markets limits the passthrough effectiveness of the Federal Reserve’s monetary policy. We focus on frictions associated with imperfect competition, regulation, infrastructure, and other forms of institutional segmentation within money markets. We model how imperfect competition is exacerbated by costs to cash investors associated with search and information attention. Bloomberg radio interview (audio).

Le présent rapport examine certaines questions relatives à l’ébauche d’avant-projet de la Loi sur la stabilité des marchés des capitaux (LSMC). Les enjeux liés à la LSMC ne sont pas étudiés de façon exhaustive dans ce rapport. Il s’agit d’un rapport parmi plusieurs rapports d’experts, chacun traitant d’un sous-ensemble de questions.