The effectiveness of non-standard monetary policy in addressing liquidity risk during the financial crisis: The experiences of the Federal Reserve and the European Central Bank
AbstractA number of studies sought to measure the effects of non-standard policy on bank funding markets. This paper carries those estimates a step further by looking at the effects of bank funding market stress on the volume of bank lending. By separately modeling loan supply and demand, we determine how non-standard central bank measures affected bank lending by reducing stress in bank funding markets. Our results suggest that non-standard policy measures lowered bank funding volatility in the US and the Euro Area. Lower bank funding volatility in turn increased loan supply in both regions, contributing to sustained lending activity.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 43 (2014)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/jedc
Bank lending; Non-standard policy; Bank funding volatility;
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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