The run on repo and the Fed’s response

Gary Gorton, Toomas Laarits and Andrew Metrick

Journal of Financial Stability, 2020, vol. 48, issue C

Abstract: The Financial Crisis began and accelerated in short-term money markets. One such market is the multi-trillion dollar sale-and-repurchase (“repo”) market, where prices show strong reactions during the crisis. The academic literature and policy community remain unsettled about the role of repo runs, because detailed data on repo quantities is not available. We provide quantity evidence of the run on repo through an examination of the collateral brought to emergency liquidity facilities of the Federal Reserve. We show that the magnitude of repo discounts (“haircuts”) on specific collateral is related to the likelihood of that collateral being brought to Fed facilities.

Keywords: Financial crisis; Sale and repurchase market; Safe assets; Federal Reserve (search for similar items in EconPapers)
JEL-codes: E40 E58 G01 G2 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: The Run on Repo and the Fed's Response (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:48:y:2020:i:c:s157230892030022x

DOI: 10.1016/j.jfs.2020.100744

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