{
  "title": "Liquidity Ratios as Monetary Policy Tools: Some Historical Lessons for Macroprudential Policy",
  "publication": "IMF Working Papers, August 16, 2019",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2019/08/16/liquidity-ratios-as-monetary-policy-tools-some-historical-lessons-for-macroprudential-policy-47004",
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  "summary": "This paper explores what history can tell us about the interactions between macroprudential and monetary policy. Based on numerous historical documents, we show that liquidity ratios similar to the Liquidity Coverage Ratio (LCR) were commonly used as monetary policy tools by central banks between th",
  "sections": [
    {
      "heading": "Overview and Research Question",
      "content": "- Authors: Eric Monnet, Miklos Vari\n- Publication: IMF Working Papers, Working Paper No. 2019/176, Issue 176, Volume 2019\n- Date: August 16, 2019\n- Pages: 48\n- DOI: https://doi.org/10.5089/9781498320474.001\n- ISBN: 9781498320474\n- ISSN: 1018-5941\n- Subject keywords: Asset and liability management; Banking; Financial institutions; Financial regulation and supervision; Government securities; Liquidity indicators; Liquidity management; Liquidity requirements; Monetary policy; Reserve requirements; Securities\n- Focus: Historical interactions between macroprudential and monetary policy via liquidity ratios"
    },
    {
      "heading": "Key Historical Findings",
      "content": "- Liquidity ratios similar to the Liquidity Coverage Ratio (LCR) were commonly used as monetary policy tools by central banks between the 1930s and 1980s.\n- Contemporary central bankers’ descriptions of mechanisms are supported by numerous historical documents examined in the paper."
    },
    {
      "heading": "Theoretical Mechanism and Model",
      "content": "- The authors build a model that rationalizes the historical mechanisms described by central bankers.\n- Central model insight:\n  - An increase in the liquidity ratio has contractionary effects.\n  - Mechanism: higher liquidity ratios reduce the quantity of assets banks can pledge as collateral.\n  - This contractionary effect operates through quantity rationing of collateralized lending.\n  - The contractionary effect is more pronounced when excess reserves are scarce."
    },
    {
      "heading": "Policy-Relevant Implications",
      "content": "- Liquidity requirements can function as monetary policy instruments, not only as macroprudential tools.\n- Interaction concerns:\n  - Adjusting liquidity ratios can tighten financial conditions by reducing collateral availability.\n  - The macroeconomic impact of liquidity-ratio changes depends critically on the abundance or scarcity of excess reserves."
    },
    {
      "heading": "Keywords and Thematic Links (as provided)",
      "content": "- asset purchases\n- bank liquidity\n- central bank control\n- discount rate\n- discount window\n- Europe\n- Fed official\n- Fed system\n- Global\n- Government securities\n- Liquidity management\n- Liquidity requirements\n- monetary management\n- monetary policy tool\n- money market\n- repo market\n- Reserve requirements\n- Securities\n- securities requirements\n- securities reserves requirements\n- securities-reserve requirement\n- Specialness\n- WP\n\nSource: IMF Working Paper No. 2019/176, \"Liquidity Ratios as Monetary Policy Tools: Some Historical Lessons for Macroprudential Policy\", Eric Monnet and Miklos Vari, August 16, 2019.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/08/16/liquidity-ratios-as-monetary-policy-tools-some-historical-lessons-for-macroprudential-policy-47004"
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    "Authors: Eric Monnet, Miklos Vari",
    "Published: August 16, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781498320474.001",
    "Authors: Eric Monnet, Miklos Vari",
    "Publication: IMF Working Papers, Working Paper No. 2019/176, Issue 176, Volume 2019",
    "Date: August 16, 2019",
    "Pages: 48",
    "DOI: https://doi.org/10.5089/9781498320474.001",
    "ISBN: 9781498320474",
    "ISSN: 1018-5941",
    "Subject keywords: Asset and liability management; Banking; Financial institutions; Financial regulation and supervision; Government securities; Liquidity indicators; Liquidity management; Liquidity requirements; Monetary policy; Reserve requirements; Securities",
    "Focus: Historical interactions between macroprudential and monetary policy via liquidity ratios",
    "Liquidity ratios similar to the Liquidity Coverage Ratio (LCR) were commonly used as monetary policy tools by central banks between the 1930s and 1980s.",
    "Contemporary central bankers’ descriptions of mechanisms are supported by numerous historical documents examined in the paper.",
    "The authors build a model that rationalizes the historical mechanisms described by central bankers.",
    "Central model insight:",
    "Liquidity requirements can function as monetary policy instruments, not only as macroprudential tools.",
    "Interaction concerns:",
    "asset purchases",
    "bank liquidity",
    "central bank control",
    "discount rate",
    "discount window",
    "Europe",
    "Fed official",
    "Fed system",
    "Global",
    "Government securities",
    "Liquidity management",
    "Liquidity requirements",
    "monetary management",
    "monetary policy tool",
    "money market",
    "repo market",
    "Reserve requirements",
    "Securities",
    "securities requirements",
    "securities reserves requirements",
    "securities-reserve requirement",
    "Specialness",
    "WP",
    "**Working Paper**"
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