4 However, if arbitrage in financial markets for some reason is imperfect, the market operations of the central bank will affect term premiums. 5 Moreover, it is likely that such financial market imperfection will become more severe during times of financial crisis.
In practice, if we look back at the response of central banks in the United States and Europe immediately after the collapse of Lehman Brothers, we find that the most important issue was the stabilization of financial markets and the financial system, and central banks to this end provided large amounts of liquidity and intervened in financial markets that showed signs of malfunction.