Models of Discount Window Lending: A Review

Ennis, Huberto M.

doi:10.21144/eq1020101

Cited by 4 publications

(2 citation statements)

References 29 publications

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“…This assumption can be interpreted as allowing an early repayment of a commercial bill before maturity. 14 Assumption 2. A manufacturer can cancel an exchange between its commercial bill and a commercial bank's private bank notes in period 1 by returning the private bank notes to the commercial bank in the same period.…”

Section: Self-fulfilling Run On Private Bank Notesmentioning

confidence: 99%

On Separation between Payment and Saving Instruments

Tomura

2019

SSRN Journal

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Section: Self-fulfilling Run On Private Bank Notesmentioning

confidence: 99%

On Separation between Payment and Saving Instruments

Tomura

2019

SSRN Journal

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“…There is an extensive theoretical literature exploring issues related to the provision of discount-window credit by a central bank (see Ennis [2016] for a recent review). However, the empirical literature is much more scant.…”

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confidence: 99%

The Fed's Discount Window: An Overview of Recent Data

Ackon¹,

Ennis²

2018

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he Dodd-Frank Act of 2010 requires the Federal Reserve to publish data on discount-window transactions with approximately two years'delay, starting from the passage of the Act in July 2010. The availability of these data provides an opportunity, for policymakers and researchers alike, to get a more detailed perspective on the nature of lending in this important and traditional central bank credit facility. The Fed provides credit through the discount window using three di¤erent programs: primary credit, secondary credit, and seasonal credit. Primary credit and secondary credit are emergency credit programs. These programs constitute a backup source of short-term funding for eligible …nancial institutions. Seasonal credit is aimed at smaller institutions with a predictable (and demonstrable) seasonal pattern in their funding needs. Each loan must be secured by collateral from the borrowing institution. The primary-credit program is a standing facility in which depository institutions in good …nancial conditions (in the form of a high score on their examination rating) can access (mainly) overnight funding with "no questions asked" and at an interest rate higher than the target policy short-term rate. Those institutions not eligible for primary credit can receive secondary credit. Normally, secondary credit is o¤ered at a rate that is …fty basis points above the primary-credit rate. Furthermore, secondary-credit We would like to thank Chris Mast for helpful discussions and

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A Theory of Collateral for the Lender of Last Resort*

2021

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We consider a macroprudential approach to analyze the optimal lending policy for the central bank, focusing on spillover effects that policy exerts on money markets. Lending against high-quality collateral protects central banks against losses, but can adversely affect liquidity creation in markets since high-quality collateral gets locked up with the central bank rather than circulating in markets. Lending against low-quality collateral creates counterparty risk but can improve liquidity in markets. We illustrate the optimal policy incorporating these trade-offs. Contrary to what is generally accepted, lending against high-quality collateral can have negative effects, whereas it may be optimal to lend against low-quality collateral.

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Models of Discount Window Lending: A Review

Cited by 4 publications

References 29 publications

On Separation between Payment and Saving Instruments

On Separation between Payment and Saving Instruments

The Fed's Discount Window: An Overview of Recent Data

A Theory of Collateral for the Lender of Last Resort*

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