Central Bank Emergency Support to Securities Markets
51 Pages Posted: 9 Aug 2017
Date Written: July 2017
This paper considers the central bank mandate with respect to financial stability and identifies the links to the functioning of securities markets. It argues that while emergency support to securities markets is an important part of the crisis management response, a high bar should be set for its use. Importantly, it should be used only as part of a comprehensive policy package. The paper considers what types of securities markets may be important for financial stability, what market conditions could trigger emergency support measures, and how programs can be designed to restore market functioning while minimizing moral hazard.
Keywords: Liquidity, Central banks and their policies, Lender-of-last resort, market maker of last resort, fire sales, and financial stability, financial stability, Government Policy and Regulation
JEL Classification: E58, G21, G23, G28
Suggested Citation: Suggested Citation