Central bank refinancing greatly lowers banking risk – ECB paper

European Central Bank
The European Central Bank

Central bank refinancing operations play a crucial role in dealing with banking sector risk, a working paper published by the European Central Bank finds.

In The (unobservable) value of central bank’s refinancing operations, Ugo Albertazzi et al present a micro-structural model of an imperfectly competitive banking sector, which incorporates central bank funding.

Its estimation and calibration is based on granular data for the eurozone’s banking system, between 2014 and 2019. They simulate

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