Collateral Frameworks: The Open Secret of Central Banks

by Kjell G. Nyborg

Overview

Central bank collateral frameworks are an often overlooked feature of monetary policy that play a key role in the monetary and financial system. Readers will discover how central banks conduct and implement monetary policy beyond merely setting interest rates, and develop their understanding as to how collateral policies may affect financial markets, financial stability, and the real economy. This book studies the collateral framework in the euro area in detail, and levers this analysis to provide an account of the euro crisis from the perspective of collateral policy. Readers gain access to a wealth of institutional and economic data and information with a level of density and accessibility unavailable elsewhere. This book, the first of its kind, is a valuable read for academic monetary and financial economists, those working in banking and policy-making financial institutions, and anyone who wishes to learn more about the role of central banks in society.

Product Details

ISBN-13:	9781107155848
Publisher:	Cambridge University Press
Publication date:	12/15/2016
Pages:	344
Product dimensions:	6.22(w) x 9.25(h) x 0.79(d)

About the Author

Kjell G. Nyborg is Chaired Professor of Finance at the University of Zurich, Senior Chair of the Swiss Finance Institute, Research Fellow of the Centre for Economic Policy Research, and Fellow of the Royal Society of Arts. He is also a former Director and the current Vice President and President-elect of the European Finance Association. Nyborg studied mathematics and economics at the University of Chicago before going on to do a PhD, with a specialization in finance, at the Graduate School of Business, Stanford University. He has previously taught at London Business School, the University of California, Los Angeles, and the Norwegian School of Economics.

Table of Contents

Preface; Acknowledgments; 1. Background and motivation; 2. Collateral frameworks: overview; 3. Monetary policy in the euro area; 4. Production and usage of collateral; 5. Haircuts; 6. Ratings and guarantees; 7. Market and theoretical prices; 8. Collateral 'own use'; 9. Non-regulated markets; 10. Market discipline; 11. Bailing out the euro; 12. Endgame of euro crisis; 13. Restoring credibility; 14. The problem with collateral; 15. Concluding remarks; References; Index.

Editorial Reviews

"This important book shines a light on the often overlooked yet impactful workings of the European Central Bank's policy, as well as the political economy, 'organized hypocrisy' and lack of credibility that have plagued the euro since its creation. Nyborg's insights and thoughtful proposals for the Eurozone deserve attention."
Anat R. Admati, George G. C. Parker Professor of Finance and Economics, Graduate School of Business, Stanford University, and co-author of The Bankers' New Clothes: What's Wrong with Banking and What to Do about It

"Collateral plays a crucial role in the functioning of the monetary and financial system. This book investigates how central banks' collateral frameworks operate. It is an excellent contribution by one of the leading scholars in financial economics. I recommend it without reservation to all academics, practitioners and students interested in the topic."
Professor Franklin Allen, Imperial College London

"Central bank provision of liquidity has become a dominant feature of economies and financial markets over the last ten years. Yet few really understand how this mysterious process occurs. This book demystifies the mechanism which lies at the heart of monetary policy. I recommend it for anyone who wants to go beyond a superficial understanding of the way that economies are managed and capital markets controlled."
Professor Ian Cooper, London Business School

"Kjell Nyborg focuses squarely on the official rules - collateral frameworks - by which central banks, relying on collateral, provide liquidity to the banking system. I urge anyone interested in the euro crisis to read this book to understand the central role of the Eurosystem's collateral frameworks in the crisis and how, in the right hands, they may be used to bring about the crisis's end."
Dr Walter N. Torous, Massachusetts Institute of Technology

"This book studies the collateral framework in the euro area in detail, and uses the framework to provide a narrative of the euro crisis from the perspective of collateral policy. The book has a wealth of institutional and economic data and information with a level of density and accessibility unavailable elsewhere. Professor Kjell Nyborg is ideally situated to write this book, given the unique blend of his academic research and policy experience. This book is one of a kind, and is a must-read for anyone who wishes to learn more about the role of central banks in society."
Suresh Sundaresan, Chase Manhattan Bank Professor of Economics and Finance and Faculty Director, India Business Initiative (IBI), Columbia University

From the Publisher