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The possibility that government borrowing may crowd out private borrowing has been widely discussed in the popular press and extensively analyzed by researchers. The Clinton Administration's “Operation Twist,” resulting in increased reliance on short‐term securities to fund the Federal deficit, highlights the impact of the maturity structure of Treasury debt issues on interest rates. This paper examines the relationship between changes in the maturity distribution of Treasury issues and Moody's twenty year AA municipal bond yield. Briefly, I find changes in the maturity structure of outstanding Treasury securities Granger‐cause changes in the Moody's twenty‐year AA municipal bond yield. The results suggest that changes in the maturity structure of Treasury borrowing will impact the interest expense of municipal debt issues and therefore the rate of return earned by holders of municipal securities.

The purpose of this paper is to estimate the effects of liquidity on corporate bond spreads.

Using a systematic liquidity factor extracted from the yield spreads between on- and off-the-run Treasury issues as a state variable, the authors jointly estimate the default and liquidity spreads from corporate bond prices.

The authors find that the liquidity factor is strongly related to conventional liquidity measures such as bid-ask spread, volume, order imbalance, and depth. Empirical evidence shows that the liquidity component of corporate bond yield spreads is sizable and increases with maturity and credit risk. On average the liquidity spread accounts for about 25 percent of the spread for investment-grade bonds and one-third of the spread for speculative-grade bonds.

The results show that a significant part of corporate bond spreads are due to liquidity, which implies that it is not necessary for credit risk to explain the entire corporate bond spread.

The results show that returns from investments in corporate bonds represent compensations for bearing both credit and liquidity risks.

It is a novel approach to extract a liquidity factor from on- and off-the-run Treasury issues and use it to disentangle liquidity and credit spreads for corporate bonds.

This chapter focuses on examining how changes in the liquidity differential between nominal and TIPS yields influence optimal portfolio allocations in U.S. Treasury securities. Based on a nonparametric estimation technique and comparing the optimal allocation decisions of mean-variance and CRRA investor, when investment opportunities are time varying, I present evidence that liquidity risk premium is a significant risk-factor in a portfolio allocation context. In fact, I find that a conditional allocation strategy translates into improved in-sample and out-of-sample asset allocation and performance. The analysis of the portfolio allocation to U.S. government bonds is particularly important for central banks, specially in developing countries, given the fact that, collectively they have accumulate a large holdings of U.S. securities over the last 15 years.

The purpose of this paper is first, to engage in a critical examination of the broad legislative framework of the Emergency Economic Stabilization Act, 2008, in the United States; second, to provide an in‐depth understanding the legal basis, scope and nature of the Troubled Asset Relief Program (TARP) under the Act; third, to provide a legal analysis of the oversight provisions in the new Act; fourth, to examine the powers, responsibilities, functions and roles of the various new oversight offices set up under the new Act; fifth, to assess the economic and financial impact of implementation of the programme till early 2009; and to engage in a critical discussion of the limitations and shortcomings of TARP. The central focus of the paper is largely on TARP and the issues arising from using TARP as a legislative framework to facilitate the removal of toxic assets held by the various banks and financial institutions.

The larger approach used in this paper is a financial law approach. It is to facilitate an in‐depth analysis of the broader framework of the Emergency Economic Stabilization Act, 2008, i.e. the legislative mechanism that establishes the TARP. The central issue of the paper is to examine the provisions in TARP in the broader context of its ability to take toxic assets off the balance sheets of banks and financial institutions. The approach, therefore, aims to aid a critical examination of the related legal, financial and economic issues arising out of the implementation of TARP. It relies extensively on official publications, testimonials and reports by various oversight bodies in the public domain, academic writings and newspaper reports to assess the impact of the programme and explore the related legal, regulatory and financial implications.

The findings in the paper relate to the impact and extent of the TARP till the present. It explores the basis, nature and scope of the implementation of the programme and outlines the various shortcomings and limitations. The paper concludes that there are various issues that need to be redressed for TARP or a similar programme to be more effective and transparent.

Various oversight reports and recommendations by official bodies are still expected as regards various spending, accountability and transparency issues related to TARP in the coming months. A new stimulus package of $787 billion was just approved by the US Congress and signed into law (American Recovery and Reinvestment Act, 2009) at the time this article was submitted for publication consideration. The article incorporates some issues relating to the new stimulus package as well as the Geithner plan, Public Private Investment Programme (PPIP), in the concluding section. However, substantial details are yet to emerge as to how the American Recovery and Reinvestment Act, 2009, establishing the stimulus package under the Obama government and the PPIP are both going to impact the future implementation of TARP and induce economic recovery at a broader level.

This paper is of immense significance to academics, jurists, consultants, legislators, policy‐makers, bankers, lawyers, auditors, consultants, researchers and anyone interested in financial and banking issues.

There is not a comprehensive study which covers the evolution of the Turkish Islamic liquidity management landscape so far. The purpose of this study is to show how Turkish PBs have been gradually furnished with the needed liquidity management instruments by the Turkish Treasury, Central Bank of the Republic of Turkey and other related regulatory bodies and to analyze the repercussions of the evolution of Islamic liquidity management on balance sheets of participation banks (PBs) over time. This study also aims to come up with some humble policy recommendations that can improve Islamic liquidity management set up going forward.

The study acknowledges that at least two important elements of liquidity management should be in place on the way of improving the Islamic liquidity management environment. The first one is asset side liquidity or having an adequate amount of high-quality liquid assets. The second one is liability side liquidity, meaning that having access to funding liquidity, especially to central bank liquidity. Historical development of liquidity-related asset-side and liability-side balance sheet items between 2010 and 2020 are analyzed and visualized to demonstrate the progress in the Islamic liquidity management landscape in Turkey.

From 2010 to 2020, Turkish financial authorities made a great effort to get PBs to have more proper liquidity management tools. Turkish authorities have leveled the playing field for PBs via enriching liquidity management tools. Government sukuk issuances has filled the liquid asset gap, improved the liquidity profile of PBs and lessened overall liquidity risk while introduced central bank liquidity facilitates have reduced funding liquidity risk. Islamic liquidity management setup is much more advanced and participation banking system is more resilient than the past, but there are still some missing steps that can further ameliorate the Islamic liquidity management ecosystem in Turkey.

This study is a visualized ratio analysis of PB’s improving liquidity profile in the past 10 years and fills an important gap in terms of displaying the overall Islamic liquidity management landscape in Turkey. Further studies and analysis can be built on this paper on Islamic liquidity management, banking and finance in the future. This paper can be a useful basement for researchers who intend to study on potential impacts of improving the liquidity of PBs on monetary transmission, banking profitability and overall banking system systemic risks.

Three different and interconnected areas should be further improved. These are enriching the diversity of government securities, providing central bank liquidity facilities under various available Islamic contracts and establishing an organized Islamic money market which will facilitate fund flows among various Islamic Financial Institutions (IFIs) and conventional financial institutions. Policymakers should act together, handle arising issues in a holistic manner, design and operationalize these incomplete parts of the puzzle to further optimize the playing field for the IFIs. Thus, there will be a more inclusive and competitive finance industry in which all risks are better managed and resources are more efficiently allocated.

Although various other studies are available on the Turkish Islamic banking industry, there is not such a specific study on Islamic liquidity management of Turkish PBs which makes this study a preliminary and different one. Apart from shedding light on the Turkish journey that has built a sound Islamic liquidity management infrastructure in the past 10 year, this study also shows an exemplary country experience in developing a more inclusive and robust financial ecosystem. This paper also contributes to financial development and inclusion literature as a policy paper.

Argues that the similarities between US treasury securities (treasuries) and FDIC‐insured large retail certificates of deposit (CDs) should make their prices similar in an efficient market. Considers deposit pricing and substitutability between treasuries and CDs, citing previous research; and presents a study comparing their yields for three maturities using 1986‐1995 data. Presents the results and analyses further to explore the links between changes in treasury yields and lagged changes in CD yields; and upward CD yield stickiness. Finds that CD and treasury yield spreads changed from small and positive to large and negative over the period with little effect on deposit balances; and concludes that those investors who remained interested in insured balances during the early 1990s were either insensitive to interest rates or had high switching costs. Suggests that banks have used this unwillingness to migrate to non‐insured funds to decrease CD rates relative to treasuries for higher profits and asks how long this market segment will continue to accept inferior yields.

The purpose of this paper is to use the local correlation technique to measure flight to quality, which is defined as a pronounced and generally rapid increase in risk aversion. Flight to quality between American, British, German, Japanese, and Hong Kong spot equity indices and index futures is examined.

The technique of non‐linear local correlation is employed to detect flight to quality in both spot and futures markets. The use of this methodology allows us to properly process both normally or non‐normally distributed time series. In addition, the estimation of local correlation minimizes the theoretical restrictions resulting from the selection of conditional events and the use of linear regression.

As market risk grows, an increase in flight to quality is documented. For example, a crash in the US stock market results in the flight of capital to the Treasury bond market. Evidence of flight to quality from domestic and foreign spot equity markets to US Treasury bonds is provided. Furthermore, flights to quality from domestic and foreign index futures to US bond futures are revealed. The strength of the reaction from one market to the other is measured and reported. Surprisingly, the authors observe that when market risk becomes extremely high, flight to quality diminishes.

To the best of the authors' knowledge, this is the first study that examines flight to quality in the futures markets by applying local correlation analysis. This study broadens the application of local polynomial regression and local correlation analysis.

In August 2007 the Mainsail II SIV-Lite was frozen by its trustee as a result of the ongoing credit crisis. The state of Maine held $20 million of Mainsail commercial paper in its Cash Pool portfolio, a short-term portfolio that puts temporary, excess state revenues to work. When word of the potential loss became public, the Treasurer came under attack. The case introduces the functions of a state Treasury department, with particular emphasis on the investment objectives and guidelines for the cash pool as well as its composition. The case reviews the events leading up to and including August 2007, the month when the credit markets first began to seize and when the financial crisis effectively began. It examines securitization, structured finance, and the Mainsail SIV-Lite structure in some detail.