Money and Collateral

Author/Editor: Manmohan Singh ; Peter Stella
Publication Date: April 01, 2012
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Between 1980 and before the recent crisis, the ratio of financial market debt to liquid assets rose exponentially in the U.S. (and in other financial markets), reflecting in part the greater use of securitized assets to collateralize borrowing. The subsequent crisis has reduced the pool of assets considered acceptable as collateral, resulting in a liquidity shortage. When trying to address this, policy makers will need to consider concepts of liquidity besides the traditional metric of excess bank reserves and do more than merely substitute central bank money for collateral that currently remains highly liquid.
Series: Working Paper No. 12/95
Subject(s): Asset management | Liquidity | Money

Author's Keyword(s): Money | collateral | liquidity | financial crisis | securitization | central bank
Publication Date: April 01, 2012
ISBN/ISSN: 9781475502855/1018-5941 Format: Paper
Stock No: WPIEA2012095 Pages: 21
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