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The Run on Repo and the Policy Interventions to Struggle the Great Crisis

In: Modern Financial Crises

Author

Listed:
  • Beniamino Moro

    (University of Cagliari)

Abstract

At the core of the recent Great Crisis is the emergence over the last 35 years of the shadow banking system, which recreated in the USA the conditions for a panic. This time the panic firstly took place in the repo market, which suffered a run when “depositors” required increasing haircuts. Fears of insolvency reduced interbank lending, and this so-called run on repo caused temporary disruptions in the pricing system of short-term debt markets. The subsequent crisis reduced the pool of assets considered acceptable as collateral, resulting in a liquidity shortage. With declining asset values and increasing haircuts, the US banking system was effectively insolvent for the first time since the Great Depression. Finally, the policy interventions to struggle the crisis are briefly discussed.

Suggested Citation

  • Beniamino Moro, 2016. "The Run on Repo and the Policy Interventions to Struggle the Great Crisis," Financial and Monetary Policy Studies, in: Modern Financial Crises, edition 127, chapter 0, pages 61-77, Springer.
    • Handle: RePEc:spr:fimchp:978-3-319-20991-3_4
    DOI: 10.1007/978-3-319-20991-3_4
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    Cited by:

    1. Ignacio Benito Amaro, 2020. "Evaluación Económica de pérdidas por enfermedades en bovinos: métodos de valuación de perdida," Asociación Argentina de Economía Política: Working Papers 4310, Asociación Argentina de Economía Política.
    2. Víctor A. Beker, 2020. "How to prevent a new global financial crisis," Asociación Argentina de Economía Política: Working Papers 4309, Asociación Argentina de Economía Política.

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