Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/280417 
Year of Publication: 
2023
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 31/2023
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
We utilize the Eurosystem securities lending facilities as a laboratory to investigate the impact of collateral scarcity on market functioning. The reduction of securities lending fees, implemented in November 2020, provides a natural experiment for our analyses. This policy change results in a surge in the utilization of securities lending facilities, particularly for bonds with limited supply elasticity in the repo market. We find no evidence of substitution effects; instead, the overall activity in the repo market expands through the collateral multiplier. The improved pricing conditions alleviate collateral scarcity and enhance market quality in both the repo and cash markets.
Subjects: 
safe assets
collateral scarcity
monetary policy
quantitative easing
securities lending facilities
repo
market functioning
JEL: 
G10
G21
E50
E58
ISBN: 
978-3-95729-966-6
Document Type: 
Working Paper

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