We consider the desirability of modifying a standard Taylor rule for a central bank's interest rate policy to …]) or a response to variations in the aggregate volume of credit (as proposed by Christiano et al. [2007]). We then examine … in the financial sector that increase equilibrium spreads and contract the supply of credit. We conduct our analysis …

--in particular, balance sheet constraints and counterparty credit risk. The empirical evidence supports the Fed's views on the … primacy of balance sheet constraints in the earlier stages of the crisis and the increased prominence of counterparty credit … order to evaluate when central bank programs are likely to be effective and under what conditions the programs might cease …

Shadow banks conduct credit intermediation without direct, explicit access to public sources of liquidity and credit … guarantees. Shadow banks contributed to the credit boom in the early 2000s and collapsed during the financial crisis of 2007 …

subsequently experienced the highest degree of financial turmoil. A progressive relaxation of credit standards can rationalize this …