The effectiveness of non-standard monetary policy in addressing liquidity risk during the financial crisis: The experiences of the Federal Reserve and the European Central Bank

Seth Carpenter, Selva Demiralp and Jens Eisenschmidt

Journal of Economic Dynamics and Control, 2014, vol. 43, issue C, 107-129

Abstract: A number of studies sought to measure the effects of non-standard policy on bank funding markets. This paper carries those estimates a step further by looking at the effects of bank funding market stress on the volume of bank lending. By separately modeling loan supply and demand, we determine how non-standard central bank measures affected bank lending by reducing stress in bank funding markets. Our results suggest that non-standard policy measures lowered bank funding volatility in the US and the Euro Area. Lower bank funding volatility in turn increased loan supply in both regions, contributing to sustained lending activity.

Keywords: Bank lending; Non-standard policy; Bank funding volatility (search for similar items in EconPapers)
JEL-codes: E58 G21 G32 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:43:y:2014:i:c:p:107-129

DOI: 10.1016/j.jedc.2014.03.005

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