Collateral could be useful tool at zero lower bound, says ECB paper
Research published yesterday by the European Central Bank (ECB) has modelled the interaction of a central bank's collateral eligibility framework and its monetary policy, finding that collateral could be a useful policy tool at the zero lower bound.
The paper: Central bank collateral, asset fire sales, regulation and liquidity, models the stability of short-term bank funding as a strategic game of depositors deciding whether to stay or run. Author Ulrich Bindseil uses this to study a broad range
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