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The Fed, Liquidity, and Credit Allocation (ICPSR 24563)

Principal Investigator(s): Thornton, Daniel L., Federal Reserve Bank of St. Louis


The current financial turmoil has generated considerable discussion of liquidity. Moreover, it has been widely reported that the Federal Reserve played a major role in supplying liquidity to financial markets during this distressed time. This article describes two ways in which the Fed has supplied liquidity since late 2007. The first is traditional: The Fed supplies liquidity by providing credit through open market operations and by lending to depository institutions at the so-called discount window. The second is by enhancing the liquidity of portfolios of some institutions by replacing their less-liquid assets with more-liquid assets. The Fed has used the second approach since late 2007. Unlike several previous occasions, however, it began supplying liquidity in the first, more traditional way only recently in September 2008. This article notes that the Fed departed from its long-standing tradition of minimizing its effect on the allocation of credit by supplying liquidity to institutions that it believed to be most in need, at the same time, it neutralized the effects of these actions on the total supply of liquidity in the financial market. The article also discusses the Fed's reasons for reallocating credit this time rather than simply increasing the total supply of financial market liquidity.

Access Notes

  • These data are flagged as replication datasets and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.

  • The public-use data files in this collection are available for access by the general public. Access does not require affiliation with an ICPSR member institution.


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Study Description


Thornton, Daniel L. The Fed, Liquidity, and Credit Allocation. ICPSR24563-v2. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2013-06-14. https://doi.org/10.3886/ICPSR24563.v2

Persistent URL: https://doi.org/10.3886/ICPSR24563.v2

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  • RIS (generic format for RefWorks, EndNote, etc.)
  • EndNote XML (EndNote X4.0.1 or higher)


This study was funded by:

  • Federal Reserve Bank of St. Louis. Research Division

Scope of Study

Subject Terms:    banks, central banks, credit, Federal Open Market Committee, Federal Reserve System, financial assets, financial institutions, financial policy, foreign exchange, housing costs, monetary policy, policy making

Geographic Coverage:    United States

Time Period:   

  • 1995-01-01--2008-11-30

Unit of Observation:    United States monetary base

Universe:    United States monetary base

Data Collection Notes:

The data are distributed as a Microsoft Excel file, which provides data, tables, and figures used in the publication.

These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigators if further information is desired.



Original ICPSR Release:   2009-01-26

Version History:

  • 2013-06-14 Updated Microsoft Excel file as well as added Documentation.txt file to collection.

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