The Run on Repo and the Fed's Response
35 Pages Posted: 8 Aug 2018 Last revised: 29 Aug 2019
Date Written: August 22, 2019
The Financial Crisis began and accelerated in short-term money markets. One such market is the multi-trillion dollar sale-and-repurchase (repo) market, where prices show strong reactions during the crisis. The academic literature and policy community remain unsettled about the role of repo runs, because detailed data on repo quantities is not available. We provide quantity evidence of the run on repo through an examination of the collateral brought to emergency liquidity facilities of the Federal Reserve. We show that the magnitude of repo discounts (haircuts) on specific collateral is related to the likelihood of that collateral being brought to Fed facilities.
Keywords: Financial Crises, Repo, Centeral Bank
JEL Classification: E32, E44, E58, G01
Suggested Citation: Suggested Citation