The Shadow Value of Central Bank Lending

Ugo Albertazzi, Lorenzo Burlon, Tomas Jankauskas and Nicola Pavanini
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Tomas Jankauskas: https://www.newyorkfed.org/research/economists/Jankauskas

No 20251016, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: After the Great Financial Crisis, the European Central Bank (ECB) extended its monetary policy toolbox to include the use of long-term loans to banks at interest rates close to zero or even negative. These central bank interventions were aimed at supporting the transmission of expansionary monetary policy and likely played a crucial role in bolstering the financial stability of the euro area, namely by reducing the chance of bank runs. However, quantitative evidence on the effects of these interventions on financial stability remains scant. In this post, we quantify the effectiveness of central bank lending programs in supporting financial stability through the lens of a novel structural model discussed in this paper.

Keywords: central bank policies; bank runs; Imperfect Competition; structural estimation (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 G01 G21 L13 (search for similar items in EconPapers)
Date: 2025-10-16
New Economics Papers: this item is included in nep-cba, nep-eec, nep-eur, nep-ifn and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:101970

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DOI: 10.59576/lse.20251016

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