The price of money: The reserves convertibility premium over the term structure

Kjell Nyborg and Jiri Woschitz

No 18371, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Central-bank money provides utility by serving as means of exchange for virtually all transactions in the economy. New reserves (money) are issued to banks in exchange for collateral such as government bonds. An asset's degree of direct convertibility into fresh reserves may affect its utility and, consequently, its market price. We show the existence of a government-bond reserves convertibility premium, which tapers off at longer maturities. Essentially, there is a pure monetary component to some asset prices. Our findings have implications for our understanding of liquidity premia, the term structure of interest rates, and the impact of central-bank collateral policy.

JEL-codes: E43 E52 G12 (search for similar items in EconPapers)
Date: 2023-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP18371 (application/pdf)

Related works:
Working Paper: The Price of Money: The Reserves Convertibility Premium over the Term Structure (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:18371

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP18371

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().