Discount window borrowing after 2003: The explicit reduction in implicit costs |
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Authors: | Erhan Artuç Selva Demiralp |
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Institution: | Department of Economics, Koç University, Istanbul 34450, Turkey |
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Abstract: | In 2003, the Federal Reserve introduced primary credit as its main discount window lending program. This program replaced the adjustment credit program, which, subject to a number of restrictions, had generated a stigma associated with borrowing from the Federal Reserve. Lessening the stigma of borrowing was viewed as essential for reducing the reluctance to borrow from the Federal Reserve. We develop a structural model of daily borrowing. Using this model, we estimate the implicit cost associated with borrowing. Our results suggest that the stigma of borrowing is significantly reduced. |
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Keywords: | E40 E58 |
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