The Effect of the PPPLF on PPP Lending by Commercial Banks

Sriya Anbil, Mark Carlson and Mary-Frances Styczynski
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Sriya Anbil: https://www.federalreserve.gov/econres/sriya-l-anbil.htm

No 2021-030, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We analyze whether the Federal Reserve's Paycheck Protection Program Liquidity Facility (PPPLF) was successful in bolstering the ability of commercial banks to provide credit to small businesses under the Small Business Administration's Paycheck Protection Program (PPP). Using an instrumental variables approach, we find a causal effect of the facility boosting PPP lending. On average, commercial banks that used the PPPLF extended over twice as many PPP loans, relative to their total assets, as banks that did not use the PPPLF. Our instrument is a measure of banks' familiarity with the operation of the Federal Reserve’s discount window; this measure is strongly related to both the propensity to sign up for and to utilize the PPPLF. Further, using a similar instrumental variables approach, we find evidence that the availability of the facility as a backstop source of funds may also have supported bank PPP lending, especially for larger banks.

Keywords: COVID-19; PPP; PPPLF; Federal Reserve; Central bank lending (search for similar items in EconPapers)
JEL-codes: E58 G21 H81 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2021-05-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-30

DOI: 10.17016/FEDS.2021.030

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