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Sizing Up Repo


  • Krishnamurthy, Arvind
  • Nagel, Stefan
  • Orlov, Dmitry


We measure the repo funding extended by money market funds (MMF) and securities lenders to the shadow banking system, including quantities, haircuts, and repo rates by type of underlying collateral. We find that repo played only a small role in funding private sector assets prior to the crisis, as most repos are backed by Treasury and Agency collateral. Repo with private sector collateral contracts during the crisis, but the magnitude is relatively insignificant compared with the contraction in asset-backed commercial paper (ABCP). While relatively small in aggregate, the contraction in repo particularly affected key dealer banks with large exposures to private sector securities, which then had knock-on effects on security markets, and led these dealer banks to resort to the Fed's emergency lending programs. We also find that haircuts in MMF-to-dealer repo rise less than the dealer-to-dealer or dealer-to-hedge fund repo haircuts reported in earlier papers. This finding suggests that the contraction in repo led dealers to take defensive actions, given their own capital and liquidity problems, raising credit terms to their borrowers. The picture that emerges from these findings looks less like a traditional bank run of depositors and more like a credit crunch among dealer banks.

Suggested Citation

  • Krishnamurthy, Arvind & Nagel, Stefan & Orlov, Dmitry, 2012. "Sizing Up Repo," CEPR Discussion Papers 8795, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8795

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    Other versions of this item:

    • Arvind Krishnamurthy & Stefan Nagel & Dmitry Orlov, 2014. "Sizing Up Repo," Journal of Finance, American Finance Association, vol. 69(6), pages 2381-2417, December.

    References listed on IDEAS

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    More about this item


    Dealer Banks; Financial Crisis; Repurchase Agreements; Shadow Banking;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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