Would a Bagehot style corporate bond backstop have helped counter the Great Recession?
John Duca and
Anthony Murphy ()
Economics Letters, 2013, vol. 119, issue 3, 351-353
Abstract:
In 2008, US corporate bond spreads almost reached Great Depression levels. The Fed was a lender of last resort in commercial paper, but not corporate bonds. The Fed’s FRB/US macroeconomic model is used to simulate the effects of the Fed successfully capping the BBB-10 year Treasury spread at 100 basis points above the 1970–2006 average spread. The simulations suggest that real GDP might have been one percentage point higher and the unemployment rate one-half percentage point lower.
Keywords: Corporate bond spread; Lender of last resort; Financial frictions; Great Recession (search for similar items in EconPapers)
JEL-codes: E44 E50 N12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:119:y:2013:i:3:p:351-353
DOI: 10.1016/j.econlet.2013.02.010
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