The Great Escape? A Quantitative Evaluation of the Fed's Liquidity FacilitiesMarco Del Negro, Gauti Eggertsson, Andrea Ferrero, Nobuhiro Kiyotaki
NBER Working Paper No. 22259 We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities and ask: Can a shock to the liquidity of private paper lead to a collapse in short-term nominal interest rates and a recession like the one associated with the 2008 U.S. financial crisis? Once the nominal interest rate reaches the zero bound, what are the effects of interventions in which the government provides liquidity in exchange for illiquid private paper? We find that the effects of the liquidity shock can be large, and show some numerical examples in which the liquidity facilities prevented a repeat of the Great Depression in 2008-2009.
Acknowledgments and Disclosures Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w22259 Published: Marco Del Negro & Gauti Eggertsson & Andrea Ferrero & Nobuhiro Kiyotaki, 2017. "The Great Escape? A Quantitative Evaluation of the Fed's Liquidity Facilities," American Economic Review, American Economic Association, vol. 107(3), pages 824-857, March. citation courtesy of Users who downloaded this paper also downloaded* these:
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