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Federal Reserve Liquidity Provision during the Financial Crisis of 2007–2009

Author

Listed:
  • Michael J. Fleming

    (Federal Reserve Bank of New York, New York 10045)

Abstract

This review examines the Federal Reserve's (or Fed's) unprecedented liquidity provision during the financial crisis of 2007–2009. It first reviews how the Fed provides liquidity in normal times. It then explains how the Fed's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with access to liquidity, and increasing the flexibility with which institutions could tap such liquidity. The review then assesses the growing empirical literature on the effectiveness of the facilities and provides insights as to where further research is warranted.

Suggested Citation

  • Michael J. Fleming, 2012. "Federal Reserve Liquidity Provision during the Financial Crisis of 2007–2009," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 161-177, October.
    • Handle: RePEc:anr:refeco:v:4:y:2012:p:161-177
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-110311-101735
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    Keywords

    central bank; liquidity facilities; lender of last resort;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises

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