Collateral and Monetary Policy

August 28, 2013

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

Financial lubrication in markets is indifferent to margin posting via money or collateral; the relative price(s) of money and collateral matter. Some central banks are now a major player in the collateral markets. Analogous to a coiled spring, the larger the quantitative easing (QE) efforts, the longer the central banks will impact the collateral market and associated repo rate. This may have monetary policy and financial stability implications since the repo rates map the financial landscape that straddles the bank/nonbank nexus.

Subject: Banking, Central bank policy rate, Collateral, Financial institutions, Financial services, Financial statements, Monetary policy, Public financial management (PFM), Repo rates, Unconventional monetary policies

Keywords: Africa, Central bank policy rate, central banks, Collateral, collateral market, collateral rate, Europe, Financial statements, intermediation function, IS/LM, market participant, pledged collateral, quantitative easing, re-use rate, release rate, release to nonbank, repo curve, repo rate, Repo rates, Unconventional monetary policies, velocity of collateral, WP

Pages:
17
Volume:
2013
DOI:
https://doi.org/10.5089/9781484384916.001
Issue:
186
Series:
Working Paper No. 2013/186
Stock No:
WPIEA2013186
ISBN:
9781484384916
ISSN:
1018-5941

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