Liquidity facilities and interbank lending

This paper by economists from the Federal Reserve Bank of San Francisco finds that the liquidity facilities introduced by central banks during the current crisis helped lower the liquidity premium in term interbank rates.

To investigate the effect of central bank liquidity facilities on term interbank lending rates, the authors estimate a six-factor arbitrage-free model of US Treasury yields, financial corporate bond yields, and term interbank rates.

They argue that the model can account for

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