Money, Collateral and Safe Assets

By: Manmohan Singh and Peter Stella

collateral-plumbing-book

Between 1980 and the 2008 financial crisis, the use of collateral in financial markets rose exponentially in the US and in other financial markets. After the crisis, there has been a reduced pool of assets considered acceptable as collateral, resulting in a liquidity shortage. When trying to address this, policymakers will need to consider collateral besides the traditional money metrics.

Introduction

In the traditional view of a banking system, credit and money are largely counterparts to each

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