Why Do We Need Both Liquidity Regulations and Lender of Last Resort? A Perspective from Federal Reserve Lending During the 2007-09 U.S. Financial Crisis

Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs - Federal Reserve Board, Washington D.C

How Effective Were the Federal Reserve Emergency Liquidity Facilities?

Evidence from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facilit

Fund Management and Systemic Risk - Lessons from the Global Financial Crisis

Fund managers play an important role in increasing efficiency and stability in financial markets. But research also indicates that fund management in certain circumstances may contribute to the buildup of systemic risk and severity of financial crises. The global financial crisis provided a number of new experiences on the contribution of fund managers to systemic risk. In this article, we focus on these lessons from the crisis. We distinguish between three sources of systemic risk in the financial system that may arise from fund management: insufficient credit risk transfer to fund managers; runs on funds that cause sudden reductions in funding to banks and other financial entities; and contagion through business ties between fund managers and their sponsors. Our discussion relates to the current intense debate on the role the so-called shadow banking system played in the global financial crisis. Several regulatory initiatives have been launched or suggested to reduce the systemic risk arising from non-bank financial entities, and we briefly discuss the likely impact of these on the sources of systemic risk outlined in the article

Can Trade Help Poor People? The Role of Trade, Trade Policy and Market Access in Tanzania

Many development economists prescribe trade as a poverty-reducing formula. But how is this elixir supposed to work? This article contributes to the lively debate on this topic with household evidence from Tanzania — a poor country even within sub-Saharan Africa, the poorest region. About 81% of the poor work in agriculture, which accounts for 88% of the export bundle. The article describes existing poverty and then evaluates the poverty-reduction potential of trade, trade policy and market access. The article extends the analysis by simulating tariff changes and four switching scenarios that swap some poor households into trade-related sectors, such as cash cropping or tourism, to project national poverty reductions of up to 5.6% and household income increases of up to 21.5%

Household debt repayment behaviour: what role do institutions play?

Household debt repayment behavior has been understudied, especially empirically, despite the heightened debate on rising household debt, personal bankruptcy filings, and arrears. In this paper, we use data from the European Community Household Panel to analyze the determinants of household debt arrears. The paper's primary aim is to understand the role of institutions in household arrears by exploiting cross-country differences and the panel nature of the data set. We start our analysis by showing that falling into arrears has important long-term consequences for employment, self-employment, home-ownership, and health. Next, we show how arrears themselves are the result of adverse events that affect a household, such as bad health or unemployment. Finally, we show that there are important cross-country differences in how households react to these adverse events. These differences can be partly explained by local financial and judicial institutions. Indicators covering contract enforcement and the degree of credit information sharing are used to capture the costs associated with default. In particular, we show that while adverse shocks are highly important, the extent to which they affect household debt repayment depends crucially on the penalty for defaulting.Consumer credit ; Bankruptcy