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The effects of Emergency Liquidity Assistance (ELA) on Bank Lending during the Euro Area Crisis

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journal contribution
posted on 26.03.2020, 11:25 by Heather D. Gibson, Stephen G. Hall, Pavlos Petroulas, Vassilis Spilitopoulos, George S. Tavlas
We examine the impact of emergency liquidity assistance (ELA) on bank lending in eleven euro area countries during the financial crisis. With the intensification of the crisis, ELA took on a pivotal role in some countries. However, assessments of the quantitative impact of ELA in the literature are non-existent. We estimate a structural panel model for the determination of bank lending, which includes the amount of ELA received by each bank, allowing us to investigate the direct effect of ELA on lending. Our model corrects a mis-specification found in the prototype model used in the literature. We then undertake a VAR analysis, which allows us to address the effect of ELA on GDP. Finally, we examine spillover effects among banks, indicating that ELA generated positive spillovers to other banks.

History

Author affiliation

School of Business

Version

AM (Accepted Manuscript)

Published in

Journal of International Money and Finance

Publisher

Elsevier

issn

0261-5606

Acceptance date

18/12/2019

Copyright date

2020

Available date

12/02/2020

Publisher version

https://www.sciencedirect.com/science/article/pii/S0261560620300863

Language

en