Financial Plumbing and Monetary Policy

Manmohan Singh

No 2014/111, IMF Working Papers from International Monetary Fund

Abstract: This paper focuses on how changes in financial plumbing of the markets may impact the monetary policy options as central banks contemplate lift off from zero lower bound (ZLB). Under the proposed regulations, banks will face leverage ratio constraints. As a result of quantitative easing (QE), banks want balance sheet “space” for financial intermediation/ non-depository activities. At the same time, regulatory changes are boosting demand for high quality liquid assets. The paper also discusses the role of repo markets and the importance of collateral velocity and the need to avoid wedges between repo and monetary policy rates when leaving ZLB.

Keywords: WP; repo; rate; market; bank; balance sheet; quantitative easing; collateral velocity; Federal Reserve; monetary policy; repo rate; repo market; Fed liability; nonbank nexus; GC repo; Fed assets; excess reserves; Collateral; Financial statements; Repo rates; Central bank policy rate; Hedge funds; Global (search for similar items in EconPapers)
Pages: 18
Date: 2014-06-20
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Citations: View citations in EconPapers (6)

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