The Fed's Discount Window in "Normal" Times

Huberto Ennis and Elizabeth Klee

No 2021-016r1, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We study transaction-level data of bank borrowings at the Federal Reserve’s discount window from 2010 to 2019. We merge these data with quarterly information on bank balance sheets and income statements. To aid in the interpretation of our empirical analysis, we also develop a detailed model of the decision of banks to borrow from various sources, including the discount window. The objective is to contribute to a better understanding of the reasons why banks use the discount window during “normal” times—periods of relative calm in financial markets. Consistent with our model, we find that borrowing from the discount window is tightly linked to the composition of banks’ balance sheets. Most importantly, banks holding less reserves tend to borrow more often (and more) from the Fed’s discount window. Similarly, banks with more expensive and fragile liabilities, and less marketable collateral, are also more likely to borrow from the Fed.

Keywords: Banking; Federal Reserve; Central Bank; Liquidity (search for similar items in EconPapers)
JEL-codes: E52 E58 G28 (search for similar items in EconPapers)
Pages: 70 p.
Date: 2021-03-19, Revised 2024-12-20
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
Note: Revision
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Related works:
Working Paper: The Fed's Discount Window in "Normal" Times (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-16

DOI: 10.17016/FEDS.2021.016r1

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