The Eurosystem Collateral Framework Explained
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Author | : |
Publisher | : |
Total Pages | : 81 |
Release | : 2017 |
Genre | : |
ISBN | : 9789289928519 |
The Eurosystem collateral framework (ESCF) has played a key role in the ECB monetary policy implementation since 1999. Moreover, the financial and sovereign debt crisis and with it the increased reliance of banks on central bank credit have underlined the importance of central bank collateral frameworks. Broad collateral frameworks have helped prevent large-scale liquidity-driven defaults of financial institutions in all major advanced economies. More recently, they have allowed central banks to provide a large amount of - at times targeted - longer-term credit. Nevertheless, a number of authors have argued that the ESCF is too forthcoming or broad and that it does not afford the central bank sufficient protection. This paper first explains and justifies the logic of collateral frameworks in general and that of the ESCF in particular. It then reviews the main critical comments. It concludes that the ESCF has been effective (i) in providing an adequate level of elasticity for Eurosystem credit, and (ii) in protecting the Eurosystem from financial losses despite the severity of the financial and sovereign debt crisis and the large amounts of longer-term credit provided by the Eurosystem.
Author | : Kjell G. Nyborg |
Publisher | : Cambridge University Press |
Total Pages | : 345 |
Release | : 2017 |
Genre | : Business & Economics |
ISBN | : 1107155843 |
The first book-length study of the importance of collateral frameworks in monetary policy, focusing on the Eurozone and euro crisis.
Author | : Kjell G. Nyborg |
Publisher | : Cambridge University Press |
Total Pages | : 345 |
Release | : 2016-12-15 |
Genre | : Business & Economics |
ISBN | : 1316785327 |
Central bank collateral frameworks are an often overlooked feature of monetary policy that play a key role in the monetary and financial system. Readers will discover how central banks conduct and implement monetary policy beyond merely setting interest rates, and develop their understanding as to how collateral policies may affect financial markets, financial stability, and the real economy. This book studies the collateral framework in the euro area in detail, and levers this analysis to provide an account of the euro crisis from the perspective of collateral policy. Readers gain access to a wealth of institutional and economic data and information with a level of density and accessibility unavailable elsewhere. This book, the first of its kind, is a valuable read for academic monetary and financial economists, those working in banking and policy-making financial institutions, and anyone who wishes to learn more about the role of central banks in society.
Author | : Ulrich Bindseil |
Publisher | : OUP Oxford |
Total Pages | : 288 |
Release | : 2004-12-02 |
Genre | : Business & Economics |
ISBN | : 0191608475 |
The first of its kind, this book is entirely dedicated to the implementation of monetary policy. Monetary policy implementation has gone through tremendous changes over the last twenty years, which have witnessed the quiet end of 'reserve position doctrine' and the return of an explicit focus on short-term interest rates. Enthusiastically supported by Keynes and later by the monetarist school, reserve position doctrine was developed mainly by US central bankers and academics during the early 1920s, and at least in the US became the unchallenged dogma of monetary policy implementation for sixty years. The return of interest rate targeting also corresponds largely to the restoration of central banking principles established in the late 19th century. Providing a simple theory of monetary policy implementation, Bindseil goes on to explain the role of the three main instruments (open market operations, standing facilities, and reserve requirements) and reviews their use in the twentieth century. In closing, he summarizes current views on efficient monetary policy implementation.
Author | : Samuel Cheun |
Publisher | : |
Total Pages | : 0 |
Release | : 2009 |
Genre | : |
ISBN | : |
Author | : William Arrata |
Publisher | : International Monetary Fund |
Total Pages | : 45 |
Release | : 2018-12-07 |
Genre | : Business & Economics |
ISBN | : 1484386914 |
Most short-term interest rates in the Euro area are below the European Central Bank deposit facility rate, the rate at which the central bank remunerates banks’ excess reserves. This unexpected development coincided with the start of the Public Sector Purchase Program (PSPP). In this paper, we explore empirically the interactions between the PSPP and repo rates. We document different channels through which asset purchases may affect them. Using proprietary data from PSPP purchases and repo transactions for specific (“special") securities, we assess the scarcity channel of PSPP and its impact on repo rates. We estimate that purchasing 1 percent of a bond outstanding is associated with a decline of its repo rate of 0.78 bps. Using an instrumental variable, we find that the full effect may be up to six times higher.
Author | : European Central Bank |
Publisher | : |
Total Pages | : 26 |
Release | : 1998 |
Genre | : Clearing of securities |
ISBN | : |
Author | : International Monetary Fund. Monetary and Capital Markets Department |
Publisher | : International Monetary Fund |
Total Pages | : 44 |
Release | : 2018-07-19 |
Genre | : Business & Economics |
ISBN | : 1484369483 |
The flexibility shown by the ECB/Eurosystem in adapting its framework, as required by circumstances, has helped improve funding and liquidity conditions. Compared to the situation pre-crisis, the ECB/Eurosystem has provided liquidity against a broader range of collateral and for as long as four years in terms of maturity; extended liquidity in foreign currency; conducted outright purchases of public and private sector assets (now tapering off); and reduced interest rates into negative territory. In these arrangements, policy is directed from the center, but is implemented mostly by the National Central Banks (NCBs); risks are largely shared. Market participants are complimentary about the role the ECB/Eurosystem has played in backstopping the financial system and its forward guidance on monetary policy.
Author | : Corrado Macchiarelli |
Publisher | : |
Total Pages | : 30 |
Release | : 2018 |
Genre | : |
ISBN | : 9789284631704 |
The importance of collateral as an instrument for monetary policy has increased in recent years not only in the light of the changes in the ECB’s collateral framework during the crisis but also due to the progressive replacement of the unsecured money market segment with the secured one in the euro area. Both aspects are set to have consequences for collateral availability and the scarcity of high-quality assets, particularly as these interact with non-standard monetary policy. In this note, we look for evidence of the ECB’s Expanded Asset Purchase Programme (EAPP) effects through the quantity and quality of collateral, based on the Eurosystem Collateral Data, as well as a review of the literature. We conclude that collateral is vital to the well-functioning of money markets, and the availability in principle of monetary policy beyond conventional remains an important tool to deal with the issue of potential shortages of high-quality collateral, at least in the short-term. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs Committee.
Author | : Otmar Issing |
Publisher | : Centre for Economic Policy Research |
Total Pages | : 40 |
Release | : 1999 |
Genre | : Business & Economics |
ISBN | : 9781898128496 |
This paper responds to some of the questions raised by Willem Buiter in his article 'Alice in Euroland' (CEPR Policy Paper No. 1) relating to the Eurosystem's approach to transparency and accountability. In his paper Willem Buiter makes a number of specific proposals designed to enhance the ECB's transparency and accountability. In his reply, Issing states that monetary policy-makers, like anybody else, have to filter, process and structure relevant information and interpret it on the basis of a coherent frame of reasoning. This is the purpose of adopting a monetary policy strategy that serves as a guide both for internal decision-making and for external communication with the public. Therefore, he argues, transparency and accountability need to be discussed against the background of the stability-oriented monetary policy strategy that the ECB has actually adopted and not as if it were pursuing some other strategy such as direct inflation targeting.