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The (Other) Deleveraging

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  • Manmohan Singh

Abstract

Deleveraging has two components--shrinking of balance sheets due to increased haircuts/shedding of assets, and the reduction in the interconnectedness of the financial system. We focus on the second aspect and show that post-Lehman there has been a significant decline in the interconnectedness in the pledged collateral market between banks and nonbanks. We find that both the collateral and its associated velocity are not rebounding as of end-2011 and still about $4-5 trillion lower than the peak of $10 trillion as of end-2007. This paper updates Singh (2011) and we use this data to compare with the monetary aggregates (largely due to QE efforts in US, Euro area and UK), and discuss the overall financial lubrication that likely impacts the conduct of global monetary policy.

Suggested Citation

  • Manmohan Singh, 2012. "The (Other) Deleveraging," IMF Working Papers 12/179, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/179
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    References listed on IDEAS

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    1. Arvind Krishnamurthy & Stefan Nagel & Dmitry Orlov, 2014. "Sizing Up Repo," Journal of Finance, American Finance Association, vol. 69(6), pages 2381-2417, December.
    2. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
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    Cited by:

    1. Karkowska, Renata, 2013. "The empirical analysis of dynamic relationship between financial intermediary connections and market return volatility," MPRA Paper 58802, University Library of Munich, Germany.
    2. Singh, M., 2013. "OTC derivatives market – regulatory developments and collateral dynamics," Financial Stability Review, Banque de France, issue 17, pages 207-213, April.

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