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Public and private liquidity during crises times: evidence from Emergency Liquidity Assistance (ELA) to Greek banks

Author

Listed:
  • Antonis Kotidis

    (Board of Governors of the Federal Reserve System)

  • Dimitris Malliaropulos

    (Bank of Greece and University of Piraeus)

  • Elias Papaioannou

    (London Business School and CEPR)

Abstract

In a surprise move during a crisis, the ECB excluded Greek Government Bonds from the set of eligible collateral in monetary policy operations. In turn, Greek banks turned to Emergency Liquidity Assistance (ELA) to meet their funding needs. ELA replenished losses from all funding sources, consistent with its role as LOLR. However, in anticipation to a switch to ELA, banks reduced their interbank and corporate lending as a result of its higher cost and conditionality. Although multi-lender firms compensated for the associated credit crunch, single-lender firms that were not able to establish new lending relationships experienced a reduction in their exports.

Suggested Citation

  • Antonis Kotidis & Dimitris Malliaropulos & Elias Papaioannou, 2022. "Public and private liquidity during crises times: evidence from Emergency Liquidity Assistance (ELA) to Greek banks," Working Papers 304, Bank of Greece.
    • Handle: RePEc:bog:wpaper:304
    DOI: 10.52903/wp2022304
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    More about this item

    Keywords

    Central Bank Interventions; Lender of Last Resort (LOLR); Collateral Framework; Emergency Liquidity Assistance (ELA);
    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
    • 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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