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Assessing the Macroeconomic Effects of LTROs During the Great Recession

39 Pages Posted: 1 Feb 2017  

Christophe Cahn

Banque de France - Direction des Entreprises

Julien Matheron

Banque de France

Jean-Guillaume Sahuc

Banque de France; Université Paris Ouest - Nanterre, La Défense - EconomiX

Date Written: January 30, 2017

Abstract

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

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

Christophe Cahn (Contact Author)

Banque de France - Direction des Entreprises ( email )

39 rue Croix des Petits Champs
Paris Cedex 01 75049
France

Julien Matheron

Banque de France ( email )

Paris
France

Jean-Guillaume Sahuc

Université Paris Ouest - Nanterre, La Défense - EconomiX ( email )

200 Avenue de la République
Nanterre cedex, Nanterre Cedex 92000
France

Banque de France ( email )

31 rue Croix des Petits Champs
75049 Paris Cedex 01
France
+33 1 42 92-49-52 (Phone)
+33 1 42-92-62-92 (Fax)

HOME PAGE: http:// https://sites.google.com/site/sahuceconomics/

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