Policy uncertainty, lender of last resort and the real economy

摘要

A reduction in lender of last resort (LOLR) policy uncertainty positively affects bank lending and propagates to investment and employment. We exploit a unique policy that reduced uncertainty regarding the availability of future LOLR funding for banks as a quasi natural experiment. Using micro-level data on banks, firms and loans in Portugal, we generate cross-sectional variation in banks? exposure to uncertainty and find that the size of the haircut subsidy the gap between private market and central bank security valuations plays a key role in the propagation of the shock to lending and the real economy. ? 2020 Elsevier B.V. All rights reserved.