19 Pages Posted: 1 Mar 2011
Date Written: February 28, 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.
Keywords: collateral, monetary policy, cost, E52, E58
Suggested Citation: Suggested Citation
Callado-Muoz, Francisco J. and Restoy, Fernando, Collateral in Monetary Policy Operations (February 28, 2011). European Financial Management, Vol. 17, Issue 2, pp. 286-304, 2011. Available at SSRN: https://ssrn.com/abstract=1773266 or http://dx.doi.org/10.1111/j.1468-036X.2009.00504.x
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