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Wall street QE vs. main street lending: A comment

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  • Mendicino, Caterina

Abstract

Are direct lending to non-financial firms (Main Street Lending) and asset pur- chases (Wall Street QE) substitute or complementary policies? Which financial frictions are most effectively addressed by each of them? The paper by Cardamone et al. (2023) addresses these questions by contrasting the effectiveness of central bank asset purchases and direct lending to non-financial corporations through the lens of a tractable macro-banking model. Their results show that Main Street Lending is highly stimulative for COVID-19 type recessions which are characterized by significant cash flow shortages for non-financial firms. Wall Street QE is instead only effective in recessions featuring an impairment of the balance sheet of financial intermediaries, such as the 2007–2009 Great recession.

Suggested Citation

  • Mendicino, Caterina, 2024. "Wall street QE vs. main street lending: A comment," European Economic Review, Elsevier, vol. 161(C).
    • Handle: RePEc:eee:eecrev:v:161:y:2024:i:c:s0014292123001976
    DOI: 10.1016/j.euroecorev.2023.104569
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    References listed on IDEAS

    as
    1. Falk Bräuning & Teodora Paligorova, 2021. "Uptake of the Main Street Lending Program," FEDS Notes 2021-04-16-1, Board of Governors of the Federal Reserve System (U.S.).
    2. Charles T. Carlstrom & Timothy S. Fuerst & Matthias Paustian, 2017. "Targeting Long Rates in a Model with Segmented Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(1), pages 205-242, January.
    3. Cardamone, Dario & Sims, Eric & Wu, Jing Cynthia, 2023. "Wall Street QE vs. Main Street Lending," European Economic Review, Elsevier, vol. 156(C).
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    More about this item

    Keywords

    Unconventional monetary policy; Financial frictions; DSGE;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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