Collateral in Monetary Policy Operations

Francisco J. Callado†Muñoz and Fernando Restoy

European Financial Management, 2011, vol. 17, issue 2, 286-304

Abstract: We present a portfolio decision model for banks that permits us to estimate the costs associated with the need to collateralise loans from the central bank. This allows us to calibrate the difference between a restrictive collateral eligibility framework for open market operations, such as that applied by the FED, with a more flexible approach such as that of Eurosystem. We also document that there could potentially appear relevant cost differences between the various collateral mobilisation procedures (pooling and earmarking) that currently coexist in the eurozone.

Date: 2011
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https://doi.org/10.1111/j.1468-036X.2009.00504.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:17:y:2011:i:2:p:286-304

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