## Collateral and Monetary Policy

_IMF Working Papers, August 28, 2013_

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**Canonical URL:** [Collateral and Monetary Policy](https://www.imf.org/en/publications/wp/issues/2016/12/31/collateral-and-monetary-policy-40898)

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- [Markdown version](/en/publications/wp/issues/2016/12/31/collateral-and-monetary-policy-40898/index.md)
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## Bibliographic details
- Authors: Manmohan Singh
- Published: August 28, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484384916.001

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### Overview
- 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.

### Key findings
- Financial lubrication is determined by the relative price(s) of money and collateral, not by whether margins are posted in money or collateral.
- Central banks’ large-scale asset purchases (QE) affect the collateral market and associated repo rate for extended periods.
- Repo rates serve as indicators that map the financial landscape across the bank/nonbank boundary.

### Policy implications and considerations
- The prolonged central bank presence in collateral markets following QE operations can have both monetary policy and financial stability implications.
- Monitoring repo rates is important because they reflect conditions across banks and nonbanks and thus bear on transmission and systemic risk.

### Subjects and keywords (as listed)
- Subjects: 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

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## Content in this bundle

- **Collateral and Monetary Policy; by Manmohan Singh; IMF Working Paper 13/186; August 1, 2013**
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  - [Collateral and Monetary Policy; by Manmohan Singh; IMF Working Paper 13/186; August 1, 2013 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp13186.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/collateral-and-monetary-policy-40898_