This paper investigates the impact of ample liquidity provision by the European Central Bank on the functioning of the overnight unsecured interbank market from 2008 to 2014. We use novel data on interbank transactions derived from TARGET2, the main euro area payment system. To identify...

This paper investigates the impact of ample liquidity provision by the European Central Bank on the functioning of the overnight unsecured interbank market from 2008 to 2014. We use novel data on interbank transactions derived from TARGET2, the main euro area payment system. To identify...

The functioning of multi-nation monetary unions with several central banks is conditioned by many factors and considerations, such as the capacity to deal with crises, the political will and operational skill to foster financial integration and to develop a mix of rules and discretion in the...

The euro crisis remains unresolved even as financial markets may seem calm for now. The current euro regime is inherently flawed, and recent reforms have failed to turn this dysfunctional regime into a viable one. Our investigation is informed by the "cartalist" critique of traditional "optimum...

We examine the financial conditions of dealers that participated in two of the Federal Reserve's lender-of-last-resort (LOLR) facilities -- the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) -- that provided liquidity against a range of assets during...

We show that lender of the last resort (LOLR) policy contributes to higher bank interconnectedness and systemic risk. Using novel micro-level data, we analyze the haircut gap channel of LOLR – the difference between the private market and central bank haircuts. LOLR increases...

In summer 2011, elevated sovereign risk in Eurozone peripheral countries increased the solvency risk of Eurozone banks, precipitating a run on their short-term debt. We assess the effectiveness of different European Central Bank (ECB) interventions that followed – lender of last resort vs....

The Eurosystem is the fifth decentralized system in the history of central banks. It consists of the European Central Bank (ECB) and twelve National Central Banks (NCBs) forming the European Monetary Union (EMU). The stark decentrality of this System is so little known that ubiquitous statements...

The renewed interest in the theory of the lender of last resort (LOLR) as well as the missing LOLR in the Eurosystem has triggered a new thesis on the LOLR: not the central bank but the Minister of Finance is the true LOLR. The classical theorists of central banking - Steuart, Thornton, Bagehot...

This study assesses the European Central Bank’s (ECB) crisis management performance and potential for crisis resolution. The study investigates the institutional and functional constraints that delineate the ECB’s scope for policy action under crisis conditions, and how the bank has actually...