The effectiveness of the non-standard policy measures during the financial crises: the experiences of the federal reserve and the European Central Bank

Jens Eisenschmidt, Seth Carpenter and Selva Demiralp

No 1562, Working Paper Series from European Central Bank

Abstract: A growing number of studies have sought to measure the effects of non-standard policy on bank funding markets. The purpose of this paper is to carry those estimates a step further by looking at the effects of bank funding market stress on the volume of bank lending, using a simultaneous equation approach. By separately modeling loan supply and demand, we determine how nonstandard central bank measures affected bank lending by reducing stress in bank funding markets. We focus on the Federal Reserve and the European Central Bank. Our results suggest that non-standard policy measures lowered bank funding volatility. Lower bank funding volatility in turn increased loan supply in both regions, contributing to sustain lending activity. We consider this as strong evidence for a “bank liquidity risk channel”, operative in crisis environments, which complements the usual channels of transmission of monetary policy. JEL Classification: E58, G32, G21

Keywords: bank funding volatility; bank lending; non-standard policy (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
Note: 2696070
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1562.pdf (application/pdf)

Related works:
Working Paper: The effectiveness of the non-standard policy measures during the financial crises: the experiences of the Federal Reserve and the European Central Bank (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20131562

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().