Title

Monetary Policy, Liquidity, and Financial Crises: Market and Public Liquidity

Author(s)

Patrick Bolton Patrick Bolton (Columbia University)

Tano Santos Tano Santos (Columbia University)

Jose A. Scheinkman Jose Scheinkman (Princeton University)

Abstract

As the record of Federal Reserve interventions over the past year, from December 2007 to December 2008, makes abundantly clear, a foremost concern of monetary authorities in responding to the financial crisis has been to avoid a repeat of the Great Depression, and especially a repeat of the monetary contraction that Milton Friedman and Anna Schwartz (1963) have claimed as the major cause of the 1930s Depression. The Fed has shown tremendous resourcefulness and inventiveness in its liquidity injections, considerably widening the collateral eligible under the discount window and the term auction facility, and setting up new programs targeted at primary dealers, the commercial paper market, and money market funds. At the same time it has stepped in to offer guarantees on assets held by some financial institutions (e.g., Citigroup) to avoid their bankruptcy.

Creation Date

2009-10

Section URL ID

ET

Paper Number

wp034_2012_Bolton_Santos_Scheinkman_Market%20and%20Public%20Liquidity.pdf

URL

http://detc.princeton.edu/wp-content/uploads/2016/11/wp034_2012_Bolton_Santos_Scheinkman_Market-and-Public-Liquidity.pdf

File Function

Jel

C52, E44, G12

Keyword(s)

Federal reserve, great recession, banking

Suppress

false

Series

10