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dc.contributor.authorChapman, Jamesen_US
dc.contributor.authorChiu, Jonathanen_US
dc.contributor.authorMolico, Miguelen_US
dc.date.accessioned2010-11-05en_US
dc.date.accessioned2011-12-15T12:58:14Z-
dc.date.available2011-12-15T12:58:14Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/53921-
dc.description.abstractWe present a model of central bank collateralized lending to study the optimal choice of the haircut policy. We show that a lending facility provides a bundle of two types of insurance: insurance against liquidity risk as well as insurance against downside risk of the collateral. Setting a haircut therefore involves balancing the trade-off between relaxing the liquidity constraints of agents on one hand, and increasing potential inflation risk and distorting the portfolio choices of agents on the other. We argue that the optimal haircut is higher when the central bank is unable to lend exclusively to agents who actually need liquidity. Finally, for an unexpected drop in the haircut, the central bank can be more aggressive than when setting a permanent level of the haircut.en_US
dc.language.isoengen_US
dc.publisherBank of Canada Ottawaen_US
dc.relation.ispartofseriesBank of Canada Working Paper 2010,23en_US
dc.subject.jelE40en_US
dc.subject.jelE50en_US
dc.subject.ddc330en_US
dc.subject.keywordPaymenten_US
dc.subject.keywordclearing and settlement systemsen_US
dc.subject.keywordCentral bank researchen_US
dc.subject.keywordMonetary policy implementationen_US
dc.subject.keywordFinancial system regulation and policiesen_US
dc.subject.keywordFinancial servicesen_US
dc.subject.stwZentralbanken_US
dc.subject.stwGeldpolitiken_US
dc.subject.stwFinanzpolitiken_US
dc.subject.stwÖffentliche Schuldenen_US
dc.subject.stwSchuldenerlassen_US
dc.subject.stwTheorieen_US
dc.titleCentral bank haircut policyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn636315541en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Bank of Canada Working Papers

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