IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/121407.html
   My bibliography  Save this paper

Co-working in the collateral factory: analyzing the infrastructural entanglements of public debt management, central banking, and primary dealer systems

Author

Listed:
  • Pape, Fabian
  • Rommerskirchen, Charlotte

Abstract

Scholarship on sovereign debt emphasizes the importance of central banks in backstopping markets, but less attention has been devoted to the interactions of debt management offices with private finance. To fill this gap, this article examines the market-based operations of debt management offices alongside those of central banks. Debt management has played a crucial role in constructing and nurturing liquidity conditions in primary and secondary markets for sovereign debt through the contracting of primary dealers as monetary and fiscal policy partners, the embrace of repo markets, and later through the creation of special liquidity facilities. Co-working in the collateral factory of the modern financial system creates new forms of entanglements that we term the ‘collateral triangle’, linking together central banking, debt management, and primary dealer operations in a shared convergence on repo finance as integral to public sector governability and private sector business models. Debt management and central banking jointly created and now maintain the infrastructures of this ‘collateral triangle’, not least because the inherent stability risks of repo markets threaten market-based monetary policy and market-based debt management. Routine de-risking by both actors is a core feature of the collateral system.

Suggested Citation

  • Pape, Fabian & Rommerskirchen, Charlotte, 2024. "Co-working in the collateral factory: analyzing the infrastructural entanglements of public debt management, central banking, and primary dealer systems," LSE Research Online Documents on Economics 121407, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121407
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/121407/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dieter Nautz & Jörg Oechssler, 2003. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 207-220, June.
    2. Daniela Gabor, 2016. "The (impossible) repo trinity: the political economy of repo markets," Review of International Political Economy, Taylor & Francis Journals, vol. 23(6), pages 967-1000, November.
    3. Deborah Mabbett & Waltraud Schelkle, 2019. "Independent or lonely? Central banking in crisis," Review of International Political Economy, Taylor & Francis Journals, vol. 26(3), pages 436-460, May.
    4. Claudio E. V. Borio, 1997. "Monetary policy operating procedures in industrial countries," BIS Working Papers 40, Bank for International Settlements.
    5. Michael Schwan & Christine Trampusch & Florian Fastenrath, 2021. "Financialization of, not by the State. Exploring Changes in the Management of Public Debt and Assets across Europe," Review of International Political Economy, Taylor & Francis Journals, vol. 28(4), pages 820-842, July.
    6. Marius Birk & Matthias Thiemann, 2020. "Open for Business: Entrepreneurial Central Banks and the Cultivation of Market Liquidity," New Political Economy, Taylor & Francis Journals, vol. 25(2), pages 267-283, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bindseil, Ulrich & Nyborg, Kjell G., 2007. "Monetary policy implementation: A European Perspective," Discussion Papers 2007/10, Norwegian School of Economics, Department of Business and Management Science.
    2. Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2012. "Overbidding in fixed rate tenders: The role of exposure risk," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 539-549.
    3. James McNeil, 2024. "Modeling interest rate setting at the European Central Bank with bargaining models and counterfactuals," Empirical Economics, Springer, vol. 66(3), pages 1037-1053, March.
    4. Shino, Junnosuke, 2013. "A positive theory of fixed-rate funds-supplying operations in an accommodative financial environment," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 595-610.
    5. Ehrmann, M. & Worms, A., 2001. "Interbank Lending and Monetary Policy Transmission: Evidence for Germany," Papers 73, Quebec a Montreal - Recherche en gestion.
    6. Prati, Alessandro & Bartolini, Leonardo & Bertola, Giuseppe, 2003. "The overnight interbank market: Evidence from the G-7 and the Euro zone," Journal of Banking & Finance, Elsevier, vol. 27(10), pages 2045-2083, October.
    7. Xia, Ying & Chen, Muyang, 2023. "The Janus face of stateness: China's development-oriented equity investments in Africa," World Development, Elsevier, vol. 162(C).
    8. Jens R. Clausen & Juergen B. Donges, 2001. "European Monetary Policy: The Ongoing Debate on Conceptual Issues," The World Economy, Wiley Blackwell, vol. 24(10), pages 1309-1326, November.
    9. Ayuso, Juan & Repullo, Rafael, 2001. "Why did the banks overbid? An empirical model of the fixed rate tenders of the European Central Bank," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 857-870, November.
    10. Linzert, Tobias & Nautz, Dieter & Bindseil, Ulrich, 2007. "Bidding behavior in the longer term refinancing operations of the European Central Bank: Evidence from a panel sample selection model," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1521-1543, May.
    11. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    12. Mauricio Avella Gómez, 2007. "El Encaje Bancario en Colombia Perspectiva General," Borradores de Economia 4327, Banco de la Republica.
    13. Yannis Dafermos, 2022. "Climate change, central banking and financial supervision: beyond the risk exposure approach," Chapters, in: Sylvio Kappes & Louis-Philippe Rochon & Guillaume Vallet (ed.), The Future of Central Banking, chapter 8, pages 175-194, Edward Elgar Publishing.
    14. Juan Ayuso & Rafael Repullo, 2003. "A Model of the Open Market Operations of the European Central Bank," Economic Journal, Royal Economic Society, vol. 113(490), pages 883-902, October.
    15. Ulrike Neyer, 2009. "Interest on Reserves and the Flexibility of Monetary Policy in the Euro Area," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 417-438, June.
    16. Di Xiao & Andreas Krause, 2022. "Bank demand for central bank liquidity and its impact on interbank markets," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(3), pages 639-679, July.
    17. Stefan Angrick, 2018. "Structural conditions for currency internationalization: international finance and the survival constraint," Review of International Political Economy, Taylor & Francis Journals, vol. 25(5), pages 699-725, September.
    18. Nautz, Dieter & Oechssler, Jorg, 2006. "Overbidding in fixed rate tenders--an empirical assessment of alternative explanations," European Economic Review, Elsevier, vol. 50(3), pages 631-646, April.
    19. Manna, Michele, 2002. "Using money market rates to assess the alternatives of fixed vs. variable rate tenders: the lesson from 1989-1998 data for Germany," Working Paper Series 0186, European Central Bank.
    20. Ann E. Davis, 2023. "Ukraine War: Policy Miscalculations or Contradictions of Capitalism?," Review of Radical Political Economics, Union for Radical Political Economics, vol. 55(4), pages 557-567, December.

    More about this item

    Keywords

    critical macrofinance; sovereign debt; primary dealers; repo markets; monetary-fiscal coordination;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:121407. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.