Can Discount Window Stigma Be Cured?

Olivier Armantier

No 20240531, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: One of the core responsibilities of central banks is to act as “lender of last resort” to the financial system. In the U.S., the Federal Reserve has been operating as a lender of last resort through its “discount window” (DW) for more than a century. Historically, however, the DW has been plagued by stigma—banks’ reluctance to use the DW, even for benign reasons, out of concerns that it could be interpreted as a sign of financial weakness. In this post, we report on new research showing that once a DW facility is stigmatized, removing that stigma is difficult.

Keywords: lender of last resort; discount window; stigma; laboratory experiments (search for similar items in EconPapers)
JEL-codes: C92 E58 G01 (search for similar items in EconPapers)
Date: 2024-05-31
New Economics Papers: this item is included in nep-ban and nep-mon
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