Conferences at Department of Economics, University of Toronto, RCEF 2012: Cities, Open Economies, and Public Policy

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Responses to the Financial Crisis, Treasury Debt, and the Impact on Short-Term Money Markets

Warren B. Hrung, Jason Scott Seligman*

Last modified: 2012-08-02


U.S. fiscal and monetary authorities introduced several programs in response to the financial crisis. We examine responses involving Treasury debt supplies--the Term Securities Lending Facility (TSLF), Supplementary Financing Program, Treasury issuance, and open market operations. Considering policies simultaneously allows us to control for interactions. We find TSLF uniquely effective relative to other Treasury supplies. Further, we find that the effectiveness of the TSLF was due primarily to its introduction during the financial crisis. Our results show that the proper policy response to a financial crisis can involve options beyond an increase in the level of bank reserves.

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