On Aug. 3, Prof. Marcel Bluhm, QIIR visiting research fellow, delivered a speech on Persistent Liquidity Shocks and Interbank Funding. The interbank market is important for an efficient and stable financial system, transmission of monetary policy, and ultimately economic activity. Prof. Bluhm develops a theory of interbank funding across multiple maturity segments and embeds it in a micro-founded financial network model which interacts with real economic and household sectors. The model features interbank funding as an over-the-counter phenomenon and replicates financial system phenomena of network formation, monetary policy transmission, and endogenous money creation. The framework is used to carry out an optimal policy analysis in which the policymaker maximizes welfare by choosing the optimal interest rate in a trade-off between loan supply and financial fragility. It is shown that the interbank market renders the financial system more efficient compared to a financial system without mutual insurance and lender-of-last-resort.