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Provision of Liquidity through the Primary Credit Facility during the Financial Crisis: A Structural Analysis

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  • Erhan Artuç

    ()
    (Koc University)

  • Selva Demiralp

    ()
    (Koc University)

Abstract

Over the course of the recent liquidity crisis, the Federal Reserve made several changes to its primary credit lending facility such as narrowing the spread between the primary credit rate and the target funds rate and increasing the term of the borrowing. In this paper, we use the model developed by Artuç and Demiralp (2008) to provide a structural assessment of the effectiveness of these changes. Our results suggest that these changes were effective in stabilizing the federal funds market.

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File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_0912.pdf
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Bibliographic Info

Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 0912.

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Length: 34 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:koc:wpaper:0912

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Keywords: Discount Window; Primary Credit; Federal Funds Market;

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  1. Selva Demiralp & Erhan Artuç, 2007. "Discount Window Borrowing after 2003: The Explicit Reduction in Implicit Costs," Koç University-TUSIAD Economic Research Forum Working Papers 0708, Koc University-TUSIAD Economic Research Forum.
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Cited by:
  1. International Monetary Fund, 2009. "How to Stop a Herd of Running Bears? Market Response to Policy Initiatives during the Global Financial Crisis," IMF Working Papers 09/204, International Monetary Fund.
  2. Spence Hilton & James McAndrews, 2011. "Challenges and lessons of the Federal Reserve's monetary policy operations during the financial crisis," Chapters, European Central Bank.
  3. Kotaro Ishi & Kenji Fujita & Mark R. Stone, 2011. "Should Unconventional Balance Sheet Policies be Added to the Central Bank Toolkit? A Review of the Experience So Far," IMF Working Papers 11/145, International Monetary Fund.
  4. Elizabeth Klee, 2011. "The first line of defense: the discount window during the early stages of the financial crisis," Finance and Economics Discussion Series 2011-23, Board of Governors of the Federal Reserve System (U.S.).
  5. Yacine Aït-Sahalia & Jochen Andritzky & Andreas Jobst & Sylwia Nowak & Natalia Tamirisa, 2010. "Market Response to Policy Initiatives during the Global Financial Crisis," NBER Working Papers 15809, National Bureau of Economic Research, Inc.
  6. Mauricio Calani & Kevin Cowan & Pablo García S., 2011. "Inflation Targeting in Financially Stable Economies: Has it Been Flexible Enough?," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Felipe Céspedes & Roberto Chang & Diego Saravia (ed.), Monetary Policy under Financial Turbulence, edition 1, volume 16, chapter 1, pages 283-368 Central Bank of Chile.
  7. Mark R. Stone & Etienne B. Yehoue & Kotaro Ishi, 2009. "Unconventional Central Bank Measures for Emerging Economies," IMF Working Papers 09/226, International Monetary Fund.

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