The “collateral channel” of monetary policy

The importance of collateralized transactions for the global financial system has greatly increased since the financial crisis. Moreover, the influence of central banks on...

The impact of regulatory reform on money markets

A new CGFS paper suggests that bank regulatory capital and liquidity changes may reduce liquidity in money markets, create steeper short-term yield...

Using volatility to predict crises

A long-term empirical study finds two fundamental links between market volatility and financial crises. First, protracted low price volatility leads to a build-up of leverage and risk, making the...

On collateral chains

A new IMF paper investigates the role of shadow banks in securitization and collateral intermediation. One important forward-looking concern is the potential vulnerability of...

Collateral and liquidity

A new BIS paper illustrates how debt and collateralization create liquidity. In particular, money markets rely on excessive and obfuscated debt collateral to contain...

Insurance companies and systemic risk

The contribution of life insurers to systemic risk has increased, according to the IMF Global Financial Stability Report. They now hold about 12% of...

Understanding collateral runs

In normal financial runs lenders want their money back. In collateral runs borrowers want their collateral back. In today’s highly collateralized financial system the...

The side-effects of non-conventional monetary policy

A BIS summary of research gives a nice overview on non-conventional monetary policies and their unintended systemic consequences. Current policies appear to yield diminishing returns in terms...

Functions and risks of shadow banking

Shadow banking encompasses credit intermediation outside the regulated banking system, mostly through investment funds, money market funds, structured finance vehicles, broker-dealers, and finance companies....

Sovereign Wealth Funds: The very basics

Sovereign wealth funds now hold assets worth roughly 4% of global GDP, and are governed by politically-mandated investment objectives. A new IMF paper gives an...

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