The Effect of the PPPLF on PPP Lending by Commercial Banks

34 Pages Posted: 14 Jun 2021 Last revised: 30 Jun 2021

See all articles by Sriya Anbil

Sriya Anbil

Board of Governors of the Federal Reserve System

Mark A. Carlson

Board of Governors of the Federal Reserve System

Mary-Frances Styczynski

Board of Governors of the Federal Reserve System

Date Written: May, 2021

Abstract

We analyze whether the Federal Reserve's Paycheck Protection Program Liquidity Facility (PPPLF) was successful in bolstering the ability of commercial banks to provide credit to small businesses under the Small Business Administration's Paycheck Protection Program (PPP). Using an instrumental variables approach, we find a causal effect of the facility boosting PPP lending. On average, commercial banks that used the PPPLF extended over twice as many PPP loans, relative to their total assets, as banks that did not use the PPPLF. Our instrument is a measure of banks' familiarity with the operation of the Federal Reserve’s discount window; this measure is strongly related to both the propensity to sign up for and to utilize the PPPLF. Further, using a similar instrumental variables approach, we find evidence that the availability of the facility as a backstop source of funds may also have supported bank PPP lending, especially for larger banks.

JEL Classification: E58, G21, H81

Suggested Citation

Anbil, Sriya and Carlson, Mark A. and Styczynski, Mary-Frances, The Effect of the PPPLF on PPP Lending by Commercial Banks (May, 2021). FEDS Working Paper No. 2021-030, Available at SSRN: https://ssrn.com/abstract=3865419 or http://dx.doi.org/10.17016/FEDS.2021.030

Sriya Anbil (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

Mark A. Carlson

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
(202) 452-3987 (Phone)
(202) 452-2301 (Fax)

Mary-Frances Styczynski

Board of Governors of the Federal Reserve System ( email )

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

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