39 Pages Posted: 1 Feb 2017
Date Written: January 30, 2017
In response to the 2008-2009 crisis, faced with distressed financial intermediaries, the ECB embarked in longer-term refinancing operations (LTROs) with full allotment. Using an estimated DSGE model with a frictional banking sector, we find that such liquidity injections have played a key role in averting a major credit crunch. A counterfactual analysis suggests that, absent these non-conventional measures, output, consumption, investment and the GDP deflator would have been 2.5, 0.5, 9.7, and 0.5 percent lower on average over 2009, respectively.
Keywords: Financial Frictions, Unconventional Monetary Policy, Longer-Term Refinancing Operations, DSGE Model
JEL Classification: E32, E58
Suggested Citation: Suggested Citation
Cahn, Christophe and Matheron, Julien and Sahuc, Jean-Guillaume, Assessing the Macroeconomic Effects of LTROs During the Great Recession (January 30, 2017). Journal of Money, Credit, and Banking, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2908291