Scarce collateral, the term premium, and quantitative easing

Stephen Williamson

Journal of Economic Theory, 2016, vol. 164, issue C, 136-165

Abstract: A model of money, credit, and banking is constructed in which the differential pledgeability of collateral and the scarcity of collateralizable wealth lead to a term premium – an upward-sloping nominal yield curve. Purchases of long-maturity government debt by the central bank are always a good idea, but for unconventional reasons. A floor system is preferred to a channel system, as a floor system permits welfare-improving asset purchases by the central bank.

Keywords: Monetary policy; Quantitative easing; Term premium; Collateral (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (68)

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Working Paper: Scarce collateral, the term premium, and quantitative easing (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:164:y:2016:i:c:p:136-165

DOI: 10.1016/j.jet.2015.07.010

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