Abstract
Are direct lending to non-financial firms (Main Street Lending) and asset pur- chases (Wall Street QE) substitute or complementary policies? Which financial frictions are most effectively addressed by each of them? The paper by Cardamone et al. (2023) addresses these questions by contrasting the effectiveness of central bank asset purchases and direct lending to non-financial corporations through the lens of a tractable macro-banking model. Their results show that Main Street Lending is highly stimulative for COVID-19 type recessions which are characterized by significant cash flow shortages for non-financial firms. Wall Street QE is instead only effective in recessions featuring an impairment of the balance sheet of financial intermediaries, such as the 2007–2009 Great recession.
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