Managing Stigma During a Financial Crisis

57 Pages Posted: 5 Sep 2015 Last revised: 21 Dec 2016

See all articles by Sriya Anbil

Sriya Anbil

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: December 20, 2016

Abstract

How should regulators design effective emergency lending facilities to mitigate stigma during a financial crisis? I explore this question using data from an unexpected disclosure of partial lists of banks that secretly borrowed from the lender of last resort during the Great Depression. I find evidence of stigma in that depositors withdrew more deposits from banks included on the lists in comparison with banks left off the lists. However, stigma dissipated for banks that were revealed earlier after subsequent banks were revealed. Overall, the results suggest that an emergency lending facility that never reveals bank identities would mitigate stigma.

Keywords: stigma, financial crisis, lender of last resort, Federal Reserve

JEL Classification: G01, G21, G28

Suggested Citation

Anbil, Sriya, Managing Stigma During a Financial Crisis (December 20, 2016). Available at SSRN: https://ssrn.com/abstract=2655747 or http://dx.doi.org/10.2139/ssrn.2655747

Sriya Anbil (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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