Wall Street QE vs. Main Street Lending

Dario Cardamone, Eric Sims () and Jing Cynthia Wu

European Economic Review, 2023, vol. 156, issue C

Abstract: Monetary and fiscal authorities reacted swiftly to the COVID-19 pandemic by purchasing assets (or “Wall Street QE”) and lending directly to non-financial firms (or “Main Street Lending”). Our paper develops a new framework to compare and contrast these different policies. For the Great Recession, characterized by impaired balance sheets of financial intermediaries, Main Street Lending and Wall Street QE are perfect substitutes and both stimulate aggregate demand. In contrast, for the COVID-19 recession, where non-financial firms faced significant cash flow shortages, Wall Street QE is almost completely ineffective, whereas Main Street Lending can be highly stimulative.

Keywords: Main Street Lending program; Paycheck Protection Program; COVID-19; Great Recession; Quantitative easing; DSGE (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:156:y:2023:i:c:s0014292123001046

DOI: 10.1016/j.euroecorev.2023.104475

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