The collateral channel of open market operations

Nuno Cassola and Francois Koulischer

No 1906, Working Paper Series from European Central Bank

Abstract: We build a model of collateral choice by banks that allows to recover the opportunity cost of collateral use and the access of banks to the interbank market. We estimate the model using country-level data on assets pledged to the European Central Bank from 2009 to 2011. The model can be used to quantify how changes in haircuts affect the collateral used by banks and can provide proxies for the funding cost of banks. Our results suggest for example that a 5% higher haircut on low rated collateral would have reduced the use of this collateral by 10% but would have increased the average funding cost spread between high yield and low yield countries by 5% over our sample period. JEL Classification: E52, E58, G01, F36

Keywords: central bank; collateral; haircut; money market (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-ban, nep-eec and nep-mon
Note: 334845
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The collateral channel of open market operations (2019)
Working Paper: The Collateral Channel of Open Market Operations (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20161906

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