The Role of the Federal Reserve as "Lender of Last Resort" and the Seasonal Fluctuation of Interest Rates

A Steven Holland and Mark Toma

Journal of Money, Credit and Banking, 1991, vol. 23, issue 4, 659-76

Abstract: The Federal Reserve's role as a lender of last resort may explain why the seasonal fluctuation of interest rates appeared to decline around 1914. The creation of the Fed reduced the seasonal fluctuation of both the probability of a bank receiving an emergency loan and the probability of a financial panic. The seasonality of real interest rates could, therefore, have declined regardless of whether the Fed conducted seasonal open market operations. The evidence is consistent with the lender-of-last-resort model. Copyright 1991 by Ohio State University Press.

Date: 1991
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