Monetary policy disconnect
Angelo Ranaldo (),
Benedikt Ballensiefen () and
Hannah Winterberg ()
No 2003, Working Papers on Finance from University of St. Gallen, School of Finance
We analyze and quantify how two forms of segmentation lead to the monetary policy disconnect. To do this, we study the monetary policy transmission through the main short-term funding market, the repurchase agreement (repo) market. First, the lending rates of banks with access to the central bank's deposit facility are less responsive to the monetary policy target rate. Second, rates of repos secured by assets eligible Quantitative Easing programs diverge more from the target rate. We also find that both forms of segmentation add to one another, suggesting an amplifying effect in weakening monetary policy transmission.
Keywords: Interest rate pass-through; Monetary policy; Market segmentation; Short-term interest rates; Repo (search for similar items in EconPapers)
JEL-codes: E40 E43 E50 E52 E58 G18 (search for similar items in EconPapers)
Pages: 86 pages
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2020:03
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