Money Market Disconnect

Item Type Monograph (Working Paper)
Abstract A repurchase agreement (repo) is a source of funding and collateral. We document that the money market is more segmented when the collateral motive prevails. Two crucial aspects of the central bank framework lead to this disconnect: banks' access to the central bank's deposit facility and assets' eligibility for Quantitative Easing (QE). We show that repo rates lent by banks with access to the deposit facility and secured by QE eligible assets are more collateral-driven and disconnected from funding-based money market rates. Our results are relevant for different monetary policies and have suggestive implications for the monetary policy pass-through.
Authors Ballensiefen, Benedikt; Ranaldo, Angelo & Winterberg, Hannah
Language English
Keywords Money Market, Segmentation, Deposit Facility, QE, Monetary Policy
Subjects finance
HSG Classification contribution to scientific community
HSG Profile Area SOF - System-wide Risk in the Financial System
Date 4 September 2020
Publisher SoF HSG
Series Name School of Finance Working Paper
Volume 2020
Number 03
Number of Pages 54
Official URL https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
Depositing User Christina Ihasz
Date Deposited 10 Sep 2020 07:22
Last Modified 22 Dec 2022 02:47
URI: https://www.alexandria.unisg.ch/publications/260953

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Citation

Ballensiefen, Benedikt; Ranaldo, Angelo & Winterberg, Hannah: Money Market Disconnect. School of Finance Working Paper, 2020, 03.

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https://www.alexandria.unisg.ch/id/eprint/260953
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