Monetary policy transmission in segmented markets

Jens Eisenschmidt, Yiming Ma and Anthony Lee Zhang

Journal of Financial Economics, 2024, vol. 151, issue C

Abstract: Repo markets are an important first stage of monetary policy transmission. In the European repo market, the majority of participants, including non-dealer banks and non-banks, do not have access to centralized trading platforms. Rather, they rely on OTC intermediation by a small number of dealers that exert significant market power. Dealer market power causes the passthrough of the ECB's policy rate to be inefficient and unequal. Allowing market participants access to centralized trading platforms, or a secured deposit facility with the central bank, could improve the transmission efficiency of monetary policy while reducing the dispersion in repo rates across customers.

Keywords: Monetary policy; Passthrough efficiency; Repo market; Market power (search for similar items in EconPapers)
JEL-codes: E5 G1 G2 L1 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:151:y:2024:i:c:s0304405x23001782

DOI: 10.1016/j.jfineco.2023.103738

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