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

Journal of International Money and Finance, 2020, vol. 108, issue C

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: E52 E58 G01 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: 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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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:108:y:2020:i:c:s0261560620300863

DOI: 10.1016/j.jimonfin.2020.102154

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