Eligibility to the Central Bank in Times of Crises: Evidence from France, 1863–1890

We provide empirical evidence that central banks can mitigate economic crises more efficiently when they extend eligibility for their discount facility to any safe asset or solvent agent. Nineteenth-century France serves as a case study to circumvent endogeneity. Following 1863, an agricultural pandemic increased defaults outside agriculture. We exploit specificities of the discount window to create exogenous variation in central bank access. Regressions show that while the demand shock brought about by the pandemic led to an increase in defaults outside agriculture by 20 percent, this effect was significantly reduced whenever a branch office of the central bank was present.