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How the Eurosystem’s enhanced credit support policy contributed to averting a severe credit crunch in 2009


  • C. Cahn
  • J. Matheron


The authors show that the Eurosystem’s Enhanced Credit Support policy package successfully contributed to averting a major credit crunch in 2009. This package included mainly the fixed rate full allotment (FRFA) and the longer-term refinancing operations (LTROs). According to the authors’ calculations, without these non-standard monetary policy measures, the euro area’s GDP growth would have been, on average, 2.2 percentage points lower than the actual level obser ved over 2009. Credit spreads would have jumped by an extra 400 basis points. The zero lower bound on nominal interest rates would have been hit in mid-2009. What is more, the euro area would have entered into a mild deflationary episode. The authors’ assessment is based on a counterfactual simulation drawn from an estimated macroeconomic model with banking frictions.

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  • C. Cahn & J. Matheron, 2017. "How the Eurosystem’s enhanced credit support policy contributed to averting a severe credit crunch in 2009," Rue de la Banque, Banque de France, issue 40, march..
  • Handle: RePEc:bfr:rueban:2017:40

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    1. Gertler, Mark & Kiyotaki, Nobuhiro, 2010. "Financial Intermediation and Credit Policy in Business Cycle Analysis," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 11, pages 547-599 Elsevier.
    2. C. Cahn & J. Matheron & J-G. Sahuc, 2014. "Assessing the macroeconomic effects of LTROS," Working papers 528, Banque de France.
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