Financial Plumbing and Monetary Policy

Author/Editor:

Manmohan Singh

Publication Date:

June 20, 2014

Electronic Access:

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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:

This paper focuses on how changes in financial plumbing of the markets may impact the monetary policy options as central banks contemplate lift off from zero lower bound (ZLB). Under the proposed regulations, banks will face leverage ratio constraints. As a result of quantitative easing (QE), banks want balance sheet “space” for financial intermediation/ non-depository activities. At the same time, regulatory changes are boosting demand for high quality liquid assets. The paper also discusses the role of repo markets and the importance of collateral velocity and the need to avoid wedges between repo and monetary policy rates when leaving ZLB.

Series:

Working Paper No. 14/111

Subject:

Balance sheets Central banks Financial intermediation Financial stability International financial markets Monetary policy Repurchase agreements Reserves Securities markets United States

English

Publication Date:

June 20, 2014

ISBN/ISSN:

9781498367134/1018-5941

Stock No:

WPIEA2014111

Format:

Paper

Pages:

18

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