Bank of Canada paper models repo market collapse

bankofcanada

A working paper published by the Bank of Canada on June 21 produces a model of repo markets that shows even a repo market with safe bonds can collapse, but this can be prevented by central bank intervention.

The author, Hajime Tomura, shows that a situation where cash investors withdraw their money from repo markets can cause dealers to sell their bonds in search of liquidity, causing a collapse. The paper finds that a central bank can prevent the collapse by offering lending to dealers, or by

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.centralbanking.com/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: