Too TAF Towards the Risk
During the last financial crisis the Federal Reserve launched several extraordinary actions, including the creation of a number of new facilities for auctioning short-term credit, with the general aim of sustaining the financial sector and of ensuring adequate access to liquidity to financial institutions. One of these programs has been the Term Auction Facility (TAF). The goal of this paper is twofold. First, we want to study banks' liquidity and liability features depending on whether banks received credit from the TAF program. Second, we want to measure the impact of program facilities on banks liquidity risk. In order to achieve these goals we fit a treatment effects model. In the first step the probability of obtaining TAF program facilities has been instrumented by a set of variables measured before the beginning of the TAF program. In the second step, once controlled for potential selection bias and endogeneity, the impact of TAF facilities on banks liquidity risk, posterior to the end of the program, has been measured. The results suggest that, on average, banks that obtained program facilities show higher short term net liabilities, higher volume of short term liabilities and higher short term liabilities over total liabilities. These banks exhibit as well a smaller ratio of short term liabilities over total assets and risk-free assets over short term liabilities. Moreover, it has been found that banks that obtained at some point TAF facilities exhibit smaller ex post liquidity risk as well as that ex ante liquidity risk positively affects the probability of receiving program facilities. Several robustness checks confirm the main results. Our findings support the view point that the Federal Reserve correctly identified the program target banks and it also achieved the goal of decreasing liquidity risk.
|Date of creation:||Jul 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Rue A.-L. Breguet 2, CH-2000 Neuchâtel|
Phone: +41 (0)32 718 1400
Fax: +41 (0)32 718 1401
Web page: http://www2.unine.ch/irene
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007.
"Market Liquidity and Funding Liquidity,"
NBER Working Papers
12939, National Bureau of Economic Research, Inc.
- Lasse Heje Pederson & Markus K Brunnermeier, 2007. "Market Liquidity and Funding Liquidity," FMG Discussion Papers dp580, Financial Markets Group.
- Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market liquidity and funding liquidity," LSE Research Online Documents on Economics 24478, London School of Economics and Political Science, LSE Library.
- Murillo Campello & John Graham & Campbell R. Harvey, 2009.
"The Real Effects of Financial Constraints: Evidence from a Financial Crisis,"
NBER Working Papers
15552, National Bureau of Economic Research, Inc.
- Campello, Murillo & Graham, John R. & Harvey, Campbell R., 2010. "The real effects of financial constraints: Evidence from a financial crisis," Journal of Financial Economics, Elsevier, vol. 97(3), pages 470-487, September.
- McAndrews, James J. & Sarkar, Asani & Wang, Zhenyu, 2008. "The effect of the Term Auction Facility on the London Inter-Bank Offered Rate," Staff Reports 335, Federal Reserve Bank of New York, revised 01 Sep 2015.
- John B. Taylor & John C. Williams, 2008.
"A black swan in the money market,"
Working Paper Series
2008-04, Federal Reserve Bank of San Francisco.
- John C. Williams & John B. Taylor, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 58-83, January.
- John B. Taylor & John C. Williams, 2009. "A black swan in the money market," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
- Murillo Campello & Erasmo Giambona & John R. Graham & Campbell R. Harvey, 2010.
"Liquidity Management and Corporate Investment During a Financial Crisis,"
NBER Working Papers
16309, National Bureau of Economic Research, Inc.
- Murillo Campello & Erasmo Giambona & John R. Graham & Campbell R. Harvey, 2011. "Liquidity Management and Corporate Investment During a Financial Crisis," Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 1944-1979.
- Bruche, Max & Suarez, Javier, 2010. "Deposit insurance and money market freezes," Journal of Monetary Economics, Elsevier, vol. 57(1), pages 45-61, January.
- Huang, R. & Ratnovksi, L., 2009. "The Dark Side of Bank Wholesale Funding," Discussion Paper 2009-59 S, Tilburg University, Center for Economic Research.
- Rocco Huang & Lev Ratnovski, 2009.
"The dark side of bank wholesale funding,"
09-3, Federal Reserve Bank of Philadelphia, revised 01 Jun 2010.
- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2009.
"Do central bank liquidity facilities affect interbank lending rates?,"
Working Paper Series
2009-13, Federal Reserve Bank of San Francisco.
- Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2014. "Do Central Bank Liquidity Facilities Affect Interbank Lending Rates?," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 32(1), pages 136-151, January.
- Daniel L. Thornton, 2011.
"The effectiveness of unconventional monetary policy: the term auction facility,"
Federal Reserve Bank of St. Louis, issue Nov, pages 439-454.
- Daniel L. Thornton, 2010. "The effectiveness of unconventional monetary policy: the term auction facility," Working Papers 2010-044, Federal Reserve Bank of St. Louis.
- Armantier, Olivier & Ghysels, Eric & Sarkar, Asani & Shrader, Jeffrey, 2011. "Discount window stigma during the 2007-2008 financial crisis," Staff Reports 483, Federal Reserve Bank of New York, revised 01 Aug 2015.
- Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
When requesting a correction, please mention this item's handle: RePEc:irn:wpaper:11-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stefano Puddu)
If references are entirely missing, you can add them using this form.