Provision of Liquidity through the Primary Credit Facility during the Financial Crisis: A Structural Analysis

Selva Demiralp and Erhan Artuc

No 215, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: Over the course of the recent liquidity crisis, the Federal Reserve made several changes to its primary credit lending facility such as narrowing the spread between the primary credit rate and the target funds rate, increasing the terms of lending, and widening the range of acceptable collateral. In this paper, we use the model developed by Artuç and Demiralp (2008) to provide a structural assessment of the effectiveness of these changes. Our results suggest that most of these changes were highly effective in stabilizing the federal funds market.

Date: 2009
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Related works:
Journal Article: Provision of liquidity through the primary credit facility during the financial crisis: a structural analysis (2010)
Working Paper: Provision of Liquidity through the Primary Credit Facility during the Financial Crisis: A Structural Analysis (2009)
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