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Collateral in Monetary Policy Operations

19 Pages Posted: 1 Mar 2011  

Francisco J. Callado-Muoz

affiliation not provided to SSRN

Fernando Restoy

Banco de España

Date Written: February 28, 2011

Abstract

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

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

Francisco J. Callado-Muoz (Contact Author)

affiliation not provided to SSRN

No Address Available

Fernando Restoy

Banco de España ( email )

Madrid 28014
Spain
(34 91) 338 5119 (Phone)
(34 91) 338 5678 (Fax)

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