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http://ssrn.com/abstract=1754558
 
 

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Discount Window Stigma During the 2007-2008 Financial Crisis


Olivier Armantier


Federal Reserve Bank of New York

Eric Ghysels


University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Asani Sarkar


Federal Reserve Bank of New York

Jeffrey Shrader Jr.


Department of Economics, UC San Diego

April 29, 2014

FRB of New York Staff Report No. 483

Abstract:     
We provide empirical evidence for the existence, magnitude, and economic cost of stigma associated with banks borrowing from the Federal Reserve’s Discount Window (DW) during the 2007-2008 financial crisis. We find that banks were willing to pay a premium in excess of 44 basis points on average (143 basis points after the bankruptcy of Lehman Brothers) to avoid borrowing from the DW. DW stigma is economically relevant as it increased some banks’ borrowing costs by 22% of their net income during the crisis. The implications of our results for the provision of liquidity by central banks are discussed.

Number of Pages in PDF File: 73

Keywords: Discount Window, Term Auction Facility, Stigma, Crisis, ABCP, Repo

JEL Classification: G01, G28, G21, G121

working papers series





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Date posted: February 4, 2011 ; Last revised: May 16, 2014

Suggested Citation

Armantier, Olivier and Ghysels, Eric and Sarkar, Asani and Shrader, Jeffrey, Discount Window Stigma During the 2007-2008 Financial Crisis (April 29, 2014). FRB of New York Staff Report No. 483. Available at SSRN: http://ssrn.com/abstract=1754558 or http://dx.doi.org/10.2139/ssrn.1754558

Contact Information

Olivier Armantier (Contact Author)
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
Eric Ghysels
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )
Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)
HOME PAGE: http://www.unc.edu/~eghysels/
Asani Sarkar
Federal Reserve Bank of New York ( email )
Research Department
33 Liberty Street
New York, NY 10045
United States
212-720-8943 (Phone)
212-720-1582 (Fax)
HOME PAGE: http://www.newyorkfed.org/research/economists/sarkar/pub.html
Jeffrey Shrader Jr.
Department of Economics, UC San Diego ( email )
9500 Gilman Drive
La Jolla, CA 92093-0508
United States
HOME PAGE: http://acsweb.ucsd.edu/~jgshrade/
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