Japanese repo and call markets before, during, and emerging from the financial crisis

Ichiro Fukunaga and Naoya Kato

Journal of the Japanese and International Economies, 2016, vol. 39, issue C, 17-34

Abstract: We empirically investigate the relationship between the Japanese general collateral (GC) repurchase agreement (repo) and uncollateralized call rates before, during, and emerging from the recent financial crisis. Unlike the US and many other countries, the Japanese GC repo rate had been higher than the uncollateralized call rate, despite the former being secured by collateral. Moreover, during the financial crisis, the Japanese GC repo rate rose, whereas the US Treasury GC repo rate decreased. The results of our empirical analysis suggest that segmentation between the Japanese repo and call markets was an important factor in explaining these features. Our results also imply that the Bank of Japan’s policy actions during and after the financial crisis were effective to some extent in lowering both the repo and call rates, and stabilizing the relationship between them.

Keywords: Repurchase agreement (repo); Call markets; Monetary policy implementation; Financial crisis; Market segmentation (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G01 G12 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Japanese Repo and Call Markets Before, During, and Emerging from the Financial Crisis (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:39:y:2016:i:c:p:17-34

DOI: 10.1016/j.jjie.2015.11.001

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