The effect of Emergency Liquidity Assistance (ELA) on bank lending during the euro area crisis

Heather Gibson, Stephen Hall, Pavlos Petroulas, Vassilis Spiliotopoulos and George Tavlas
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Vassilis Spiliotopoulos: Bank of Greece

No 278, Working Papers from Bank of Greece

Abstract: We examine the impact of emergency liquidity assistance (ELA) on bank lending in eleven euro area countries during the financial crisis. With the intensification of the crisis, ELA took on a pivotal role in some countries. However, assessments of the quantitative impact of ELA in the literature are non-existent. We estimate a structural panel model for the determination of bank lending, which includes the amount of ELA received by each bank, allowing us to investigate the direct effect of ELA on lending. Our model corrects a mis-specification found in the prototype model used in the literature. We then undertake a VAR analysis, which allows us to address the effect of ELA on GDP. Finally, we examine spillover effects among banks, indicating that ELA generated positive spillovers to other banks.

Keywords: euro area financial crisis; emergency liquidity assistance (ELA); European banks; spatial panel model (search for similar items in EconPapers)
JEL-codes: E3 G01 G14 G21 (search for similar items in EconPapers)
Pages: 31
Date: 2020-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The effect of emergency liquidity assistance (ELA) on bank lending during the euro area crisis (2020)
Working Paper: The Effect of Emergency Liquidity Assistance (ELA) on Bank Lending during the Euro Area Crisis (2019)
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