Did the Fed’s Term Auction Facility Work?

James McAndrews, Asani Sarkar and Zhenyu Wang

No 20111011, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The Federal Reserve introduced the Term Auction Facility (TAF) in December 2007 to provide term loans to banks during the recent financial crisis. In this post, we report on the effectiveness of the TAF during the early stages of the crisis. We find that the TAF was associated with a decrease in the “liquidity premium,” one component of a bank’s borrowing cost. In other words, the TAF worked as intended.

Keywords: crisis; Federal Reserve; money markets; term funding; Libor; Term Auction Facility (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2011-10-11
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