Repo growth a good indicator of liquidity

The growth rate of repurchase agreements may be a useful measure of liquidity in a market-based financial system, research published by the New York Federal Reserve finds.

The research indicates that financial institutions increase their leverage during asset price booms and lower it during downturns. As institutions use repurchase agreements, or repos, to adjust leverage, the growth rate of the stock of repos may be a useful measure of liquidity in a market-based financial system.

The data also

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