Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297099 
Year of Publication: 
2023
Series/Report no.: 
Bank of Canada Staff Discussion Paper No. 2023-30
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Central banks may engage in large-scale lending and asset purchases to stabilize financial markets and implement monetary policy during crises. The ability of these actions to restore financial market functioning is well documented; however, they come with costs. We provide a literature review of the costs associated with these central bank actions, without commenting on the net benefits they provide. We find support for the premise that crisis actions may negatively impact market liquidity, distort asset prices, create conflicts between monetary and financial stability objectives and increase rent-seeking and unproductive uses of the liquidity provided by the central bank. We discuss measures that may mitigate the negative impacts of crisis actions.
Subjects: 
Central bank research
Financial institutions
Financial markets
Financial stability
Lender of last resort
JEL: 
E5
E58
G10
G20
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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