IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2012-179.html

The (Other) Deleveraging

Author

Listed:
  • Mr. 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

  • Mr. Manmohan Singh, 2012. "The (Other) Deleveraging," IMF Working Papers 2012/179, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/179
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=26048
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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. Mr. Manmohan Singh & Mr. Peter Stella, 2012. "Money and Collateral," IMF Working Papers 2012/095, International Monetary Fund.
    3. Patrick M McGuire & Kostas Tsatsaronis, 2008. "Estimating hedge fund leverage," BIS Working Papers 260, Bank for International Settlements.
    4. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    5. Ang, Andrew & Gorovyy, Sergiy & van Inwegen, Gregory B., 2011. "Hedge fund leverage," Journal of Financial Economics, Elsevier, vol. 102(1), pages 102-126, October.
    6. Andrei Shleifer & Robert Vishny, 2011. "Fire Sales in Finance and Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 29-48, Winter.
    7. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. Luu, Duc Thi & Napoletano, Mauro & Barucca, Paolo & Battiston, Stefano, 2021. "Collateral Unchained: Rehypothecation networks, concentration and systemic effects," Journal of Financial Stability, Elsevier, vol. 52(C).
    3. Eugenio Caverzasi & Daniele Tori, 2018. "The Financial Innovation Hypothesis: Schumpeter, Minsky and the sub-prime mortgage crisis," Working Papers PKWP1815, Post Keynesian Economics Society (PKES).
    4. Thiemann, Matthias & Birk, Marius, 2015. "The regulation of repo markets: Incorporating public interest through a stronger role of civil society," SAFE White Paper Series 25, Leibniz Institute for Financial Research SAFE.
    5. repec:spo:wpmain:info:hdl:2441/2b7q60gmqo82aqr0p34bieidke is not listed on IDEAS
    6. Singh, M., 2013. "OTC derivatives market – regulatory developments and collateral dynamics," Financial Stability Review, Banque de France, issue 17, pages 207-213, April.
    7. Diego Valiante, 2017. "The ‘Visible Hand’ of the ECB’s first quantitative easing," International Economics and Economic Policy, Springer, vol. 14(4), pages 601-624, October.
    8. Brender, Anton & Pisani, Florence & Gagna, Emile, 2015. "Money, Finance and the Real Economy: What went wrong?," CEPS Papers 10290, Centre for European Policy Studies.
    9. Stewart, Robert & Chowdhury, Murshed & Arjoon, Vaalmikki, 2021. "Interdependencies between regulatory capital, credit extension and economic growth," Journal of Economics and Business, Elsevier, vol. 117(C).
    10. Mr. Manmohan Singh & Zohair Alam, 2018. "Leverage—A Broader View," IMF Working Papers 2018/062, International Monetary Fund.
    11. Luiz Awazu Pereira da Silva & Adriana Soares Sales & Wagner Piazza Gaglianone, 2013. "Financial stability in Brazil," Chapters, in: Andreas Dombret & Otto Lucius (ed.), Stability of the Financial System, chapter 4, Edward Elgar Publishing.
    12. Grilli, Ruggero & Giri, Federico & Gallegati, Mauro, 2020. "Collateral rehypothecation, safe asset scarcity, and unconventional monetary policy," Economic Modelling, Elsevier, vol. 91(C), pages 633-645.
    13. von der Becke Susanne & Sornette Didier, 2019. "An Asset-Based Framework of Credit Creation (applied to the Global Financial Crisis)," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 9(2), pages 1-21, July.
    14. Maurizio Trapanese, 2021. "The economics of non-bank financial intermediation: why do we need to fill the regulation gap?," Questioni di Economia e Finanza (Occasional Papers) 625, Bank of Italy, Economic Research and International Relations Area.

    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. Mr. Manmohan Singh, 2011. "Velocity of Pledged Collateral: Analysis and Implications," IMF Working Papers 2011/256, International Monetary Fund.
    2. Mr. Manmohan Singh, 2013. "The Changing Collateral Space," IMF Working Papers 2013/025, International Monetary Fund.
    3. Jobst, Andreas A., 2014. "Measuring systemic risk-adjusted liquidity (SRL)—A model approach," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 270-287.
    4. Nyborg, Kjell G., 2017. "Reprint of: Central bank collateral frameworks," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 232-248.
    5. Kruttli, Mathias S. & Monin, Phillip J. & Petrasek, Lubomir & Watugala, Sumudu W., 2025. "LTCM Redux? Hedge fund Treasury trading, funding fragility, and risk constraints," Journal of Financial Economics, Elsevier, vol. 169(C).
    6. Nyborg, Kjell G., 2017. "Central bank collateral frameworks," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 198-214.
    7. Bussière, Matthieu & Hoerova, Marie & Klaus, Benjamin, 2015. "Commonality in hedge fund returns: Driving factors and implications," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 266-280.
    8. James Paulin & Anisoara Calinescu & Michael Wooldridge, 2018. "Understanding Flash Crash Contagion and Systemic Risk: A Micro-Macro Agent-Based Approach," Papers 1805.08454, arXiv.org.
    9. Alexi Savov & Alan Moreira, 2014. "The Macroeconomics of Shadow Banking," 2014 Meeting Papers 254, Society for Economic Dynamics.
    10. Paulin, James & Calinescu, Anisoara & Wooldridge, Michael, 2019. "Understanding flash crash contagion and systemic risk: A micro–macro agent-based approach," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 200-229.
    11. Dan Li & Phillip J. Monin & Lubomir Petrasek, 2024. "Credit Supply and Hedge Fund Performance: Evidence from Prime Broker Surveys," Finance and Economics Discussion Series 2024-089, Board of Governors of the Federal Reserve System (U.S.).
    12. Andrea Aguiar & Richard Bookstaber & Dror Y. Kenett & Thomas Wipf, 2016. "A Map of Collateral Uses and Flows," Working Papers 16-06, Office of Financial Research, US Department of the Treasury.
    13. Lioba Heimbach & Wenqian Huang, 2024. "DeFi leverage," BIS Working Papers 1171, Bank for International Settlements.
    14. Frank Hespeler & Giuseppe Loiacono, 2017. "Monitoring systemic risk in the hedge fund sector," Quantitative Finance, Taylor & Francis Journals, vol. 17(12), pages 1859-1883, December.
    15. Nicole Boyson & Jean Helwege & Jan Jindra, 2014. "Crises, Liquidity Shocks, and Fire Sales at Commercial Banks," Financial Management, Financial Management Association International, vol. 43(4), pages 857-884, December.
    16. Cakici, Nusret & Zaremba, Adam, 2022. "Salience theory and the cross-section of stock returns: International and further evidence," Journal of Financial Economics, Elsevier, vol. 146(2), pages 689-725.
    17. Tobias Adrian & Nellie Liang, 2018. "Monetary Policy, Financial Conditions, and Financial Stability," International Journal of Central Banking, International Journal of Central Banking, vol. 14(1), pages 73-131, January.
    18. Karlis, Alexandros & Galanis, Girogos & Terovitis, Spyridon & Turner, Matthew, "undated". "Heterogeneity and Clustering of Defaults," Economic Research Papers 270011, University of Warwick - Department of Economics.
    19. Istiak, Khandokar & Serletis, Apostolos, 2020. "Risk, uncertainty, and leverage," Economic Modelling, Elsevier, vol. 91(C), pages 257-273.
    20. François-Éric Racicot & Raymond Théoret, 2022. "Tracking market and non-traditional sources of risks in procyclical and countercyclical hedge fund strategies under extreme scenarios: a nonlinear VAR approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-56, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    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:imf:imfwpa:2012/179. 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: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.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.