Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from Nineteenth Century France

Clemens Jobst and Vincent Bignon

No 11737, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper shows that a central bank can more efficiently mitigate economic crises when it broadens eligibility for its discount facility to any safe asset or solvent agent. We use difference-in-differences panel regressions and emulate crises by studying how defaults of banks and non-agricultural firms were affected by the arrival of an agricultural disease. We exploit the specificities of the implementation of the discount window to deal with the endogeneity of the access to the central bank to the arrival of the crisis and local default rates. We find that broad eligibility reduced significantly the increase in the default rate when the shock hit the local economy. A counterfactual exercise shows that defaults would have been 10% to 15% higher if the central bank would have implemented the strictest eligibility rule. This effect is identified independently of changes in policy interest rates and the fiscal deficit.

Keywords: Discount window; Bagehot rule; Collateral; Default rate (search for similar items in EconPapers)
JEL-codes: E32 E44 E51 E58 N14 N54 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://cepr.org/publications/DP11737 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from 19th century France (2017)
Working Paper: Economic crises and the eligiblity for the lender of last resort: evidence from 19th century France (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11737

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11737

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().