IDEAS home Printed from https://ideas.repec.org/p/hal/spmain/hal-00973020.html
   My bibliography  Save this paper

The rationale for or against expanding central bank eligible collateral in times of distress

Author

Listed:
  • Jean-Paul Fitoussi

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

The current crisis is testing the capacity of policy makers to give adequate answers to the possibility of a major financial meltdown. The crisis began in the subprime sector, a relatively small segment of the mortgage industry. It is thanks to an insufficiently regulated system of financial innovations that it spread to the balance sheets of all financial institutions around the world. The briefing paper does not deal with the issue of what regulatory framework we should design. It rather focuses on the short run policy response to the crisis. I will conclude that most of the burden in this specific moment falls on fiscal policy, monetary policy having reached a liquidity trap situation. Nevertheless, monetary policy still has an important role (that it played already in the past months) in providing liquidity to the markets, and in facilitating the task of fiscal policy. In this perspective, I agree with Anne Sibert's BP of March 2008, in considering appropriate a wider definition of acceptable collateral, to include also "troubled assets". This should be done in the short run, though, and a number of medium term consequences, notably on the coordination between strictly interconnected fiscal and monetary policies, should be evaluated.

Suggested Citation

  • Jean-Paul Fitoussi, 2008. "The rationale for or against expanding central bank eligible collateral in times of distress," SciencePo Working papers Main hal-00973020, HAL.
  • Handle: RePEc:hal:spmain:hal-00973020
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-00973020
    as

    Download full text from publisher

    File URL: https://hal-sciencespo.archives-ouvertes.fr/hal-00973020/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    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:hal:spmain:hal-00973020. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Contact - Sciences Po Departement of Economics (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.