Collateral in Monetary Policy Operations
Francisco J. Callado-Muoz
affiliation not provided to SSRN
Bank of Spain
February 28, 2011
European Financial Management, Vol. 17, Issue 2, pp. 286-304, 2011
We present a portfolio decision model for banks that permits us to estimate the costs associated with the need to collateralise loans from the central bank. This allows us to calibrate the difference between a restrictive collateral eligibility framework for open market operations, such as that applied by the FED, with a more flexible approach such as that of Eurosystem. We also document that there could potentially appear relevant cost differences between the various collateral mobilisation procedures (pooling and earmarking) that currently coexist in the eurozone.
Number of Pages in PDF File: 19
Keywords: collateral, monetary policy, cost, E52, E58
Date posted: March 1, 2011
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