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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

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  • Carpenter, Seth
  • Demiralp, Selva
  • Eisenschmidt, Jens

Abstract

A 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 Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 43 (2014)
Issue (Month): C ()
Pages: 107-129

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Handle: RePEc:eee:dyncon:v:43:y:2014:i:c:p:107-129

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Bank lending; Non-standard policy; Bank funding volatility;

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Cited by:
  1. Thorsten Beck & Andrea Colciago & Damjan Pfajfar, 2014. "The role of financial intermediaries in monetary policy transmission," DNB Working Papers 420, Netherlands Central Bank, Research Department.

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