The ECB’s collateral framework

A central bank mainly interacts with financial markets in two ways when carrying out refinancing operations. The most obvious interaction, and the most important, is that the central bank fixes the short-term rate of interest consistent with the achievement of price stability. The less obvious and less important interaction is through the effect that the collateral framework has on the price of the assets that are eligible for refinancing operations. Much of my time, and even a larger share of

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