Journal of Banking & Finance Vol. 23 No. 9 1999
The discount window and credit availability
Abstract
This paper models the impact of the discount window on decisions of individual banks facing regulatory capital requirements and stochastic deposit supply. A central result is that banks may choose a larger lending capacity if the discount window is available than if it is not. Moreover, if the cost of capital is higher during recessions, banks may then avoid the window, contributing to the downturn. A discontinuous interaction emerges between risk-based capital requirements and use of the discount window, with a more stringent capital requirement inducing some banks to hold less capital.
- DOI
- 10.1016/s0378-4266(99)00008-4
- Volume
- 23
- Issue
- 9
- Pages
- 1383-1406
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib