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Financial Plumbing and Monetary Policy

Author

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  • Mr. Manmohan Singh

Abstract

This paper focuses on how changes in financial plumbing of the markets may impact the monetary policy options as central banks contemplate lift off from zero lower bound (ZLB). Under the proposed regulations, banks will face leverage ratio constraints. As a result of quantitative easing (QE), banks want balance sheet “space” for financial intermediation/ non-depository activities. At the same time, regulatory changes are boosting demand for high quality liquid assets. The paper also discusses the role of repo markets and the importance of collateral velocity and the need to avoid wedges between repo and monetary policy rates when leaving ZLB.

Suggested Citation

  • Mr. Manmohan Singh, 2014. "Financial Plumbing and Monetary Policy," IMF Working Papers 2014/111, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2014/111
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=41667
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    References listed on IDEAS

    as
    1. William Dudley, 2014. "The economic outlook and implications for monetary policy," Speech 136, Federal Reserve Bank of New York.
    2. Joseph E. Gagnon & Brian Sack, 2014. "Monetary Policy with Abundant Liquidity: A New Operating Framework for the Fed," Policy Briefs PB14-4, Peterson Institute for International Economics.
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    Cited by:

    1. Piric, Valentina & Martinovic, Maja & Barac, Zoran, 2018. "A Study On Customer’S Perception Ofcroatia’S Banking Industry," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 9(2), pages 169-180.
    2. Claudio Oliveira De Moraes & Helder Ferreira de Mendonça, 2017. "The bridge between macro and micro banking regulation," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(2), pages 214-225, May.
    3. Cochrane, John H., 2014. "Monetary policy with interest on reserves," Journal of Economic Dynamics and Control, Elsevier, vol. 49(C), pages 74-108.
    4. Diego Valiante, 2017. "The ‘Visible Hand’ of the ECB’s first quantitative easing," International Economics and Economic Policy, Springer, vol. 14(4), pages 601-624, October.

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