Repo Specialness in the Transmission of Quantitative Easing

61 Pages Posted: 31 May 2019

See all articles by Hee Su Roh

Hee Su Roh

Stanford University, Graduate School of Business, Students

Date Written: May 7, 2019

Abstract

I show that the repo specialness of sovereign bonds can magnify the transmission of central bank quantitative easing into the real economy. Investors who cannot take advantage of the repo specialness of government bonds substitute for government bonds with riskier assets, such as corporate bonds. The extra demand from this portfolio substitution lowers corporate financing costs. I quantify the magnitude of this repo specialness channel for quantitative easing (QE) transmission in the context of the Public Sector Purchase Program of the Eurosystem.

Keywords: Public Sector Purchase Program, Quantitative Easing, Repo, Specialness

JEL Classification: E44, E58, G11

Suggested Citation

Roh, Hee Su, Repo Specialness in the Transmission of Quantitative Easing (May 7, 2019). Available at SSRN: https://ssrn.com/abstract=3387085 or http://dx.doi.org/10.2139/ssrn.3387085

Hee Su Roh (Contact Author)

Stanford University, Graduate School of Business, Students ( email )

Stanford, CA
United States

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