Economic crises and the eligiblity for the lender of last resort: evidence from 19th century France
Clemens Jobst and
Vincent Bignon
No 2027, Working Paper Series from European Central Bank
Abstract:
This paper shows that a central bank can more efficiently mitigate economic crises when it broadens eligibility for its discount facility to any safe asset or solvent agent. We use difference-in-differences panel regressions and emulate crises by studying how defaults of banks and non-agricultural firms were affected by the arrival of an agricultural disease. We exploit the specificities of the implementation of the discount window to deal with the endogeneity of the access to the central bank to the arrival of the crisis and local default rates. We find that broad eligibility reduced significantly the increase in the default rate when the shock hit the local economy. A counterfactual exercise shows that defaults would have been 10% to 15% higher if the central bank would have implemented the strictest eligibility rule. This effect is identified independently of changes in policy interest rates and the fiscal deficit. JEL Classification: E44, E51, G28, E58, N14, N54
Keywords: Bagehot rule; Bank of France; collateral; default; discount window (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)
Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp2027.en.pdf (application/pdf)
Related works:
Working Paper: Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from 19th century France (2017) 
Working Paper: Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from Nineteenth Century France (2017) 
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:20172027
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 ().