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Scarce collateral, the term premium, and quantitative easing

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  • Williamson, Stephen D.

    (Washington University in St. Louis)

Abstract

A model of money, credit, and banking is constructed in which the differential pledgeability of collateral and the scarcity of collateralizable wealth lead to a term premium — an upward-sloping nominal yield curve. Purchases of long-maturity government debt by the central bank are always a good idea, but for unconventional reasons. A floor system is preferred to a channel system, as a floor system permits welfare-improving asset purchases by the central bank.

Suggested Citation

  • Williamson, Stephen D., 2014. "Scarce collateral, the term premium, and quantitative easing," Working Papers 2014-8, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2014-008
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    References listed on IDEAS

    as
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Picking on Piketty!
      by paragwaknis in Musings of the Sorts on 2014-05-10 05:01:08
    2. Neo-Fisherians: Unite and Throw off MV=PY and Your Phillips Curves!
      by Stephen Williamson in Stephen Williamson: New Monetarist Economics on 2014-11-13 22:21:00

    Citations

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    Cited by:

    1. Anne-Marie Rieu-Foucault, 2018. "Les interventions de crise de la FED et de la BCE diffèrent-elles ?," EconomiX Working Papers 2018-31, University of Paris Nanterre, EconomiX.
    2. Lukas Altermatt, 2017. "Inside money, investment, and unconventional monetary policy," ECON - Working Papers 247, Department of Economics - University of Zurich, revised Jan 2018.
    3. Bhattarai, Saroj & Neely, Christopher J., 2016. "A Survey of the Empirical Literature on U.S. Unconventional Monetary Policy," Working Papers 2016-21, Federal Reserve Bank of St. Louis.
    4. repec:eee:dyncon:v:79:y:2017:i:c:p:184-200 is not listed on IDEAS
    5. Chao Gu & Han Han & Randall Wright, 2016. "The Effects of Monetary Policy and Other Announcements," Working Papers 1621, Department of Economics, University of Missouri.
    6. Aleksander Berentsen & Sébastien Kraenzlin & Benjamin Müller, 2016. "Exit strategies for monetary policy," ECON - Working Papers 241, Department of Economics - University of Zurich, revised Feb 2018.
    7. Christian Bredemeier & Falko Juessen & Andreas Schabert, 2017. "Fiscal Multipliers and Monetary Policy: Reconciling Theory and Evidence," Working Paper Series in Economics 95, University of Cologne, Department of Economics.
    8. Williamson, Stephen D., 2017. "Low Real Interest Rates and the Zero Lower Bound," Working Papers 2017-10, Federal Reserve Bank of St. Louis.
    9. Athanasios Geromichalos & Lucas Herrenbrueck, 2017. "The Liquidity-Augmented Model of Macroeconomic Aggregates," Discussion Papers dp17-16, Department of Economics, Simon Fraser University.
    10. Andolfatto, David & Williamson, Stephen, 2015. "Scarcity of safe assets, inflation, and the policy trap," Journal of Monetary Economics, Elsevier, vol. 73(C), pages 70-92.
    11. Huber, Samuel & Kim, Jaehong, 2017. "On the optimal quantity of liquid bonds," Journal of Economic Dynamics and Control, Elsevier, vol. 79(C), pages 184-200.
    12. Andreas Schabert, 2017. "Welfare-Enhancing Distributional Effects of Central Bank Asset Purchases," Working Paper Series in Economics 94, University of Cologne, Department of Economics.
    13. repec:eee:dyncon:v:89:y:2018:i:c:p:154-172 is not listed on IDEAS
    14. Sylvia Xiao & Randall Wright & Guillaume Rocheteau, 2017. "Open Market Operations," 2017 Meeting Papers 345, Society for Economic Dynamics.
    15. Altermatt, Lukas, 2018. "Savings, asset scarcity, and monetary policy," Working papers 2018/13, Faculty of Business and Economics - University of Basel.
    16. Christian Bredemeier & Christoph Kaufmann & Andreas Schabert, 2017. "Interest Rate Spreads and Forward Guidance," Working Paper Series in Economics 96, University of Cologne, Department of Economics.

    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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