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New Zealand's emergency liquidity measures during the global financial crisis

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Abstract
This article discusses the steps taken by the Reserve Bank to alleviate market stress and maintain market functioning during the international financial crisis of 2007–09. Our statistical analysis suggests that the emergency liquidity policies introduced during the crisis period narrowed bank funding spreads in the domestic money market by 5-7 basis points, on average, per announcement. We also find some evidence that these policies helped to reduce the volatility of money market spreads. Collectively, these policies had a material cumulative impact, probably going well beyond the simple announcement effects on money market conditions captured by our formal analysis. This is because some of the policies were taken deliberately in a pre-emptive manner, and more generally they helped to limit broader disruption to the economy’s access to credit during the recession.

Suggested Citation

  • Aidan Yao & Enzo Cassino, 2011. "New Zealand's emergency liquidity measures during the global financial crisis," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 74, pages 39-50, June.
  • Handle: RePEc:nzb:nzbbul:june2011:5
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    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2011/2011jun74-2cassinoyao.pdf
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    References listed on IDEAS

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    1. Joseph E. Gagnon & Matthew Raskin & Julie Remache & Brian P. Sack, 2011. "Large-scale asset purchases by the Federal Reserve: did they work?," Economic Policy Review, Federal Reserve Bank of New York, vol. 17(May), pages 41-59.
    2. Joyce, Michael & Lasaosa, Ana & Stevens , Ibrahim & Tong, Matthew, 2010. "The financial market impact of quantitative easing," Bank of England working papers 393, Bank of England.
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    Cited by:

    1. Sarah Drought & Roger Perry & Adam Richardson, 2018. "Aspects of implementing unconventional monetary policy in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 81, pages 1-22, May.
    2. Chris Hunt, 2016. "A short history of prudential regulation and supervision at the Reserve Bank," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 79, pages 1-22, August.

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