Economics at your fingertips  

On collateral: implications for financial stability and monetary policy

Stefano Corradin, Florian Heider and Marie Hoerova ()

No 2107, Working Paper Series from European Central Bank

Abstract: This paper examines the role of collateral in the financial system, with special emphasis on the implications for financial stability and the conduct of monetary policy. First, we review what drives the demand and supply for both real and financial collateral assets. Then we examine financial stability issues and the case for regulating the use of collateral. We discuss the role and design of market infrastructures such as central clearing counterparties (CCPs). Finally, we examine the interaction of standard and non-standard monetary policy and the functioning of private collateralised markets. We show that the use of collateral is neither a sufficient nor a necessary condition for financial stability. To ensure the stability of collateralised markets a mix of micro- and macro-prudential regulation, as well as a sufficient supply of safe public assets that can be used as collateral, are needed. JEL Classification: E59, E44, G18

Keywords: central-clearing counterparties; central bank policies; haircuts; margins; repo (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: 2017-11
Note: 1103497
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
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:

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

Page updated 2019-10-16
Handle: RePEc:ecb:ecbwps:20172107