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Money and Collateral

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  • Manmohan Singh
  • Peter Stella
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    Abstract

    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.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/95.

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    Length: 21
    Date of creation: 01 Apr 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/95

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    Related research

    Keywords: Money; Liquidity; Asset management; collateral; central bank; monetary policy; monetary base; inflation; monetary liabilities; monetary authority; monetary fund; national bank; monetary arrangements; international monetary arrangements; long-term interest rates; treasury bonds; military; monetary ? policy; money market; united states military academy;

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    References

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    1. Moritz Schularick & Alan M. Taylor, 2009. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870–2008," NBER Working Papers 15512, National Bureau of Economic Research, Inc.
    2. Guillermo Ordonez & Gary Gorton, 2011. "Collateral Crises," 2011 Meeting Papers, Society for Economic Dynamics 569, Society for Economic Dynamics.
    3. Eric M. Leeper & Todd B. Walker, 2012. "Perceptions and Misperceptions of Fiscal Inflation," NBER Chapters, National Bureau of Economic Research, Inc, in: Fiscal Policy after the Financial Crisis, pages 255-299 National Bureau of Economic Research, Inc.
    4. Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2011. "A Model of Shadow Banking," Working Papers 576, Barcelona Graduate School of Economics.
    5. Kenneth D. Garbade, 2007. "The emergence of "regular and predictable" as a Treasury debt management strategy," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Mar, pages 53-71.
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    Cited by:
    1. Kartik Anand & James Chapman & Prasanna Gai, 2012. "Covered bonds, core markets, and financial stability," SFB 649 Discussion Papers SFB649DP2012-065, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    2. Vilma Dingova & Vaclav Hausenblas & Zlatuse Komarkova, 2014. "Collateralization and Financial Stability," Occasional Publications - Chapters in Edited Volumes, Czech National Bank, Research Department, in: CNB Financial Stability Report 2013/2014, chapter 0, pages 137-147 Czech National Bank, Research Department.

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