IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/121407.html
   My bibliography  Save this paper

Co-working in the collateral factory: analyzing the infrastructural entanglements of public debt management, central banking, and primary dealer systems

Author

Listed:
  • Pape, Fabian
  • Rommerskirchen, Charlotte

Abstract

Scholarship on sovereign debt emphasizes the importance of central banks in backstopping markets, but less attention has been devoted to the interactions of debt management offices with private finance. To fill this gap, this article examines the market-based operations of debt management offices alongside those of central banks. Debt management has played a crucial role in constructing and nurturing liquidity conditions in primary and secondary markets for sovereign debt through the contracting of primary dealers as monetary and fiscal policy partners, the embrace of repo markets, and later through the creation of special liquidity facilities. Co-working in the collateral factory of the modern financial system creates new forms of entanglements that we term the ‘collateral triangle’, linking together central banking, debt management, and primary dealer operations in a shared convergence on repo finance as integral to public sector governability and private sector business models. Debt management and central banking jointly created and now maintain the infrastructures of this ‘collateral triangle’, not least because the inherent stability risks of repo markets threaten market-based monetary policy and market-based debt management. Routine de-risking by both actors is a core feature of the collateral system.

Suggested Citation

  • Pape, Fabian & Rommerskirchen, Charlotte, 2024. "Co-working in the collateral factory: analyzing the infrastructural entanglements of public debt management, central banking, and primary dealer systems," LSE Research Online Documents on Economics 121407, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121407
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/121407/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gara Afonso & Marco Cipriani & Adam Copeland & Anna Kovner & Gabriele La Spada & Antoine Martin, 2021. "The Market Events of Mid-September 2019," Economic Policy Review, Federal Reserve Bank of New York, vol. 27(2), pages 1-26, August.
    2. Dieter Nautz & Jörg Oechssler, 2003. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 207-220, June.
    3. International Monetary Fund, 2010. "Government Cash Management; Its Interaction with Other Financial Policies," IMF Technical Notes and Manuals 10/13, International Monetary Fund.
    4. Claudio E. V. Borio, 1997. "Monetary policy operating procedures in industrial countries," BIS Working Papers 40, Bank for International Settlements.
    5. International Monetary Fund, 2010. "Government Cash Management: Its Interaction with Other Financial Policies," IMF Technical Notes and Manuals 2010/013, International Monetary Fund.
    6. Michael Schwan & Christine Trampusch & Florian Fastenrath, 2021. "Financialization of, not by the State. Exploring Changes in the Management of Public Debt and Assets across Europe," Review of International Political Economy, Taylor & Francis Journals, vol. 28(4), pages 820-842, July.
    7. Benjamin Braun & Arie Krampf & Steffen Murau, 2021. "Financial globalization as positive integration: monetary technocrats and the Eurodollar market in the 1970s," Review of International Political Economy, Taylor & Francis Journals, vol. 28(4), pages 794-819, July.
    8. Daniela Gabor & Cornel Ban, 2016. "Banking on Bonds: The New Links Between States and Markets," Journal of Common Market Studies, Wiley Blackwell, vol. 54(3), pages 617-635, May.
    9. Fathimath Musthaq, 2023. "Unconventional central banking and the politics of liquidity," Review of International Political Economy, Taylor & Francis Journals, vol. 30(1), pages 281-306, January.
    10. Marius Birk & Matthias Thiemann, 2020. "Open for Business: Entrepreneurial Central Banks and the Cultivation of Market Liquidity," New Political Economy, Taylor & Francis Journals, vol. 25(2), pages 267-283, February.
    11. Daniela Gabor, 2016. "The (impossible) repo trinity: the political economy of repo markets," Review of International Political Economy, Taylor & Francis Journals, vol. 23(6), pages 967-1000, November.
    12. Deborah Mabbett & Waltraud Schelkle, 2019. "Independent or lonely? Central banking in crisis," Review of International Political Economy, Taylor & Francis Journals, vol. 26(3), pages 436-460, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yannis Dafermos & Daniela Gabor & Jo Michell, 2023. "Institutional supercycles: an evolutionary macro-finance approach," New Political Economy, Taylor & Francis Journals, vol. 28(5), pages 693-712, September.
    2. Jakob Vestergaard & Daniela Gabor, 2021. "Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy," Working Papers Series inetwp170, Institute for New Economic Thinking.
    3. Bear, Laura, 2020. "Speculation: a political economy of technologies of imagination," LSE Research Online Documents on Economics 103433, London School of Economics and Political Science, LSE Library.
    4. Laurentiu Dumitru ANDREI & Petre BREZEANU, 2019. "Optimizing the Financial Structure of the State Treasury in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 180-195, June.
    5. Thordur Jonasson & Mr. Michael G. Papaioannou, 2018. "A Primer on Managing Sovereign Debt-Portfolio Risks," IMF Working Papers 2018/074, International Monetary Fund.
    6. Leek, Lauren Caroline & Bischl, Simeon, 2024. "How Central Bank Independence Shapes Monetary Policy Communication: A Large Language Model Application," SocArXiv yrhka, Center for Open Science.
    7. Bindseil, Ulrich & Nyborg, Kjell G., 2007. "Monetary policy implementation: A European Perspective," Discussion Papers 2007/10, Norwegian School of Economics, Department of Business and Management Science.
    8. repec:osf:socarx:yrhka_v1 is not listed on IDEAS
    9. Thiemann Matthias, 2021. "The Political Economy of Private Law: Comment on ‘The code of capital – how the law creates wealth and inequality’," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 11(1), pages 37-51, March.
    10. Steininger, Lea & Hesse, Casimir, 2024. "Buying into new ideas: The ECB’s evolving justification of unlimited liquidity," Department of Economics Working Paper Series 357, WU Vienna University of Economics and Business.
    11. Lea Steininger & Casimir Hesse, 2024. "Buying into new ideas: The ECB’s evolving justification of unlimited liquidity," Department of Economics Working Papers wuwp357, Vienna University of Economics and Business, Department of Economics.
    12. Braun, Benjamin & Hübner, Marina, 2017. "Fiscal fault, financial fix? Capital Markets Union and the quest for macroeconomic stabilization in the euro area," MPIfG Discussion Paper 17/21, Max Planck Institute for the Study of Societies.
    13. Leonardo Bartolini & Alessandro Prati, 2003. "The execution of monetary policy: a tale of two central banks [‘Estimating continuous-time stochastic volatility models of the short-term interest rate’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 18(37), pages 435-467.
    14. van der Heide, Arjen, 2024. "Dealing government bonds: Trading infrastructures and infrastructural power in European markets for public debt," MPIfG Discussion Paper 24/2, Max Planck Institute for the Study of Societies.
    15. Arbogast, Tobias, 2020. "Who are these bond vigilantes anyway? The political economy of sovereign debt ownership in the eurozone," MPIfG Discussion Paper 20/2, Max Planck Institute for the Study of Societies.
    16. Walter, Timo & Wansleben, Leon, 2018. "How Central Bankers Learned to Love Financialization: The Fed, the Bank, and the Enlisting of Unfettered Markets in the Conduct of Monetary Policy," OSF Preprints gzyp6, Center for Open Science.
    17. Ozgur, Gokcer, 2023. "The cross-border interconnectedness of shadow banking," Economic Modelling, Elsevier, vol. 126(C).
    18. repec:osf:socarx:4mb2q_v1 is not listed on IDEAS
    19. Guter-Sandu, Andrei & Haas, Armin & Murau, Steffen, 2023. "Green Macro-Financial Governance in the European Monetary Architecture: Assessing the Capacity to Finance the Net-Zero Transition," SocArXiv 4mb2q, Center for Open Science.
    20. repec:osf:osfxxx:gzyp6_v1 is not listed on IDEAS
    21. Yannis Dafermos & Daniela Gabor & Jo Michell, 2023. "FX swaps, shadow banks and the global dollar footprint," Environment and Planning A, , vol. 55(4), pages 949-968, June.
    22. Steffen Murau & Alexandru-Stefan Goghie & Matteo Giordano, 2024. "Encumbered Security? Conceptualising Vertical and Horizontal Repos in the Euro Area," Working Papers 262, Department of Economics, SOAS University of London, UK.
    23. Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2012. "Overbidding in fixed rate tenders: The role of exposure risk," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 539-549.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:121407. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.