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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;

    This paper has been announced in the following NEP Reports:

    References

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    1. Nicola Gennaioli & Andrei Shleifer & Robert W. Vishny, 2013. "A Model of Shadow Banking," Journal of Finance, American Finance Association, vol. 68(4), pages 1331-1363, 08.
    2. Eric M. Leeper & Todd B. Walker, 2012. "Perceptions and Misperceptions of Fiscal Inflation," NBER Working Papers 17903, National Bureau of Economic Research, Inc.
    3. Schularick, Moritz & Taylor, Alan M., 2009. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870-2008," CEPR Discussion Papers 7570, C.E.P.R. Discussion Papers.
    4. Gary B. Gorton & Guillermo Ordonez, 2012. "Collateral Crises," NBER Working Papers 17771, National Bureau of Economic Research, Inc.
    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, 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.

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