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Japanese Repo and Call Markets Before, During, and Emerging from the Financial Crisis

Author

Listed:
  • Ichiro Fukunaga

    (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: ichirou.fukunaga@boj.or.jp))

  • Naoya Kato

    (Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: naoya.katou@boj.or.jp))

Abstract

We empirically investigate the relationship between the Japanese general collateral (GC) repurchase agreement (repo) and uncollateralized call rates before, during, and emerging from the recent financial crisis. Unlike the US and many other countries, the Japanese GC repo rate has been higher than the uncollateralized call rate, despite the former being secured by collateral. Moreover, during the financial crisis, the Japanese GC repo rate rose, whereas the US Treasury GC repo rate decreased. The results of our empirical analysis suggest that segmentation between the Japanese repo and call markets is a key factor explaining these features. The analysis also reveals how much changes in the policy target rate and the current account balances at the Bank of Japan, institutional changes in the payment system, and various policy and market events affected both the repo and call rates.

Suggested Citation

  • Ichiro Fukunaga & Naoya Kato, 2014. "Japanese Repo and Call Markets Before, During, and Emerging from the Financial Crisis," IMES Discussion Paper Series 14-E-15, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:14-e-15
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    References listed on IDEAS

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    Cited by:

    1. Shin-ichi Fukuda, 2016. "Regional Liquidity Risk and Covered Interest Parity During the Global Financial Crisis: Evidence from Tokyo, London, and New York," International Economic Journal, Taylor & Francis Journals, vol. 30(3), pages 339-359, July.
    2. Fukuda, Shin-ichi, 2016. "Strong sterling pound and weak European currencies in the crises: Evidence from covered interest parity of secured rates," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 109-122.
    3. Fukunaga, Ichiro & Kato, Naoya, 2016. "Japanese repo and call markets before, during, and emerging from the financial crisis," Journal of the Japanese and International Economies, Elsevier, vol. 39(C), pages 17-34.

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    More about this item

    Keywords

    repurchase agreement (repo); call markets; monetary policy implementation; financial crisis; market segmentation; vector error correction model; threshold ARCH;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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