Discount Loans

3 Types

1. Adjustment Credit

2. Seasonal Credit
3. Extended Credit

Lender of Last Resort Function

1. To prevent banking panics

FDIC fund not big enough
Examples: Continental Illinois and Franklin National
2. To prevent nonbank financial panics
Examples: 1987 stock market crash

Announcement Effect

1. Problem: False signals

Previous slide

Next slide

Back to first slide

View graphic version