TY  - UNPD
A1  - Lengwiler, Yvan
A1  - Orphanides, Athanasios
T1  - Collateral framework: liquidity premia and multiple equilibria
T2  - Working paper series / Institute for Monetary and Financial Stability ; 157
N2  - Central banks normally accept debt of their own governments as collateral in liquidity operations without reservations. This gives rise to a valuable liquidity premium that reduces the cost of government finance. The ECB is an interesting exception in this respect. It relies on external assessments of the creditworthiness of its member states, such as credit ratings, to determine eligibility and the haircut it imposes on such debt. The authors show how such features in a central bank’s collateral framework can give rise to cliff effects and multiple equilibria in bond yields and increase the vulnerability of governments to external shocks. This can potentially induce sovereign debt crises and defaults that would not otherwise arise.
T3  - Working paper series / Institute for Monetary and Financial Stability - 157 
KW  - monetary policy
KW  - government finance
KW  - yields
KW  - liquidity premium
KW  - default premium
KW  - collateral
KW  - cliff effect
KW  - multiple equilibria
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/56454
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-564548
UR  - https://www.imfs-frankfurt.de/forschung/imfs-working-papers/details/publication/collateral-frameworkliquidity-premia-and-multiple-equilibria.html
IS  - April 2021
PB  - Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
CY  - Frankfurt am Main
ER  -