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Can Discount Window Stigma Be Cured? An Experimental Investigation

Olivier Armantier and Charles Holt

No 1103, Staff Reports from Federal Reserve Bank of New York

Abstract: A core responsibility of a central bank is to ensure financial stability by acting as the “lender of last resort” through its Discount Window. The Discount Window, however, has not been effective because its usage is stigmatized. In this paper, we study experimentally how such stigma can be cured. We find that, once a Discount Window facility is stigmatized, removing stigma is difficult. This result is consistent with the Federal Reserve’s experiences which have been unsuccessful at removing the stigma associated with its Discount Window.

Keywords: lender-of-last-resort (LOLR); Lender of last resort; discount window; stigma; laboratory experiments (search for similar items in EconPapers)
JEL-codes: C92 E58 G01 (search for similar items in EconPapers)
Pages: 37
Date: 2024-05-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-exp and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:98224

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DOI: 10.59576/sr.1103

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