Exit Strategies and Trade Dynamics in Repo Markets
Project funded by own resources
Project title Exit Strategies and Trade Dynamics in Repo Markets
Principal Investigator(s) Berentsen, Aleksander
Organisation / Research unit Departement Wirtschaftswissenschaften / Wirtschaftstheorie (Berentsen)
Project start 01.01.2016
Probable end 01.01.2026
Status Active
Abstract

How can a central bank control interest rates in an environment with large excess reserves? In this paper, we develop a dynamic general equilibrium model of a secured money market and calibrate it to the Swiss franc repo market to study this question. The theoretical model allows us to identify the factors that determine demand and supply of central bank reserves, the money market rate and trading activity in the money market. In addition, we simulate various instruments that a central bank can use to exit from unconventional monetary policy. These instruments are assessed with respect to the central bank's ability to control the money market rate, their impact on the trading activity and the operational costs of an exit. All exit instruments allow central banks to attain an interest rate target. However, the trading activity differs significantly among the instruments and central bank bills and reverse repos are the most cost-effective.

Financed by University funds
Other funds

Cooperations ()

  ID Kreditinhaber Kooperationspartner Institution Laufzeit - von Laufzeit - bis
393854  Berentsen, Aleksander  Kränzlin, Sébastien, Director  Swiss National Bank  01.01.2016  01.01.2026 
   

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