The Great Escape? A Quantitative Evaluation of the Fed's Liquidity Facilities
Marco Del Negro (),
Gauti Eggertsson (),
Andrea Ferrero () and
American Economic Review, 2017, vol. 107, issue 3, 824-57
We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities and ask: can a shock to the liquidity of private paper lead to a collapse in short-term nominal interest rates and a recession like the one associated with the 2008 US financial crisis? Once the nominal interest rate reaches the zero bound, what are the effects of interventions in which the government provides liquidity in exchange for illiquid private paper? We find that the effects of the liquidity shock can be large, and show some numerical examples in which the liquidity facilities of the Federal Reserve prevented a repeat of the Great Depression in the period 2008-2009.
JEL-codes: E13 E31 E43 E44 E52 E58 G01 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20121660
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38) Track citations by RSS feed
Downloads: (external link)
https://www.aeaweb.org/articles/attachments?retrie ... 3acpQtusPqxD91Q3Uyxs (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... 6Hmk4059EvKt4djNxrB1 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... gg66gjLWVKzOFKvS05uQ (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.
Working Paper: The great escape? A quantitative evaluation of the Fed’s liquidity facilities (2016)
Working Paper: The Great Escape? A Quantitative Evaluation of the Fed’s Liquidity Facilities (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:107:y:2017:i:3:p:824-57
Ordering information: This journal article can be ordered from
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().