Assessing the Macroeconomic Effects of LTROs during the Great Recession

In response to the 2008–2009 crisis, faced with distressed financial intermediaries, the European Central Bank (ECB) embarked in longer term refinancing operations (LTROs) with full allotment. Using an estimated DSGE model with a frictional banking sector, we find that such liquidity injections have...

Full description

Saved in:
Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 2017-10, Vol.49 (7), p.1443-1482
Main Authors: CAHN, CHRISTOPHE, MATHERON, JULIEN, SAHUC, JEAN-GUILLAUME
Format: Article
Language:English
Subjects:
Banking industry
Central banks
Consumption
DSGE model
E32
E58
Economics and Finance
financial frictions
Humanities and Social Sciences
Liquidity
longer term refinancing operations
Recessions
Refinancing
unconventional monetary policy
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In response to the 2008–2009 crisis, faced with distressed financial intermediaries, the European Central Bank (ECB) embarked in longer term refinancing operations (LTROs) with full allotment. Using an estimated DSGE model with a frictional banking sector, we find that such liquidity injections have played a key role in averting a major credit crunch. A counterfactual analysis suggests that, absent these nonconventional measures, output, consumption, investment, and the GDP deflator would have been 2.5%, 0.5%, 9.7%, and 0.5% lower on average over 2009, respectively.
ISSN:0022-2879
1538-4616
DOI:10.1111/jmcb.12421