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The Term Funding Facility: Has It Encouraged Business Lending?

Author

Listed:
  • Sharon Lai

    (Reserve Bank of Australia)

  • Kevin Lane

    (Reserve Bank of Australia)

  • Laura Nunn

    (Reserve Bank of Australia)

Abstract

The Reserve Bank of Australia's Term Funding Facility (TFF) was announced in March 2020 as part of a package of policy measures to support the Australian economy. It achieved a key objective of providing banks with three-year low-cost funding and was available for drawdown until 30 June 2021. This paper examines the effectiveness of the TFF in increasing the supply of credit to businesses, which was another one of the objectives of the program. Using bank-level data and a difference-in-differences approach, we find no statistically significant evidence that the TFF increased credit supply to businesses. However, our confidence intervals are wide and there are significant identification challenges involved in disentangling the effects of the TFF from the effects of pandemic-related disruptions and other policy interventions on credit supply and demand. Nonetheless, the TFF provided an assured source of funding at a time of considerable stress in the financial system and lowered banks' funding costs, and any effects on business lending via these channels may not be fully reflected in our results.

Suggested Citation

  • Sharon Lai & Kevin Lane & Laura Nunn, 2022. "The Term Funding Facility: Has It Encouraged Business Lending?," RBA Research Discussion Papers rdp2022-07, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2022-07
    DOI: 10.47688/rdp2022-07
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    References listed on IDEAS

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    5. Churm, Rohan & Joyce, Michael & Kapetanios, George & Theodoridis, Konstantinos, 2021. "Unconventional monetary policies and the macroeconomy: The impact of the UK's QE2 and funding for lending scheme," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 721-736.
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    Cited by:

    1. Timothy Watson & Paul Buckingham, 2023. "Australian Government COVID‐19 Business Supports," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 124-140, March.

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    More about this item

    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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