My paper, The Collateral Supply Effect on Monetary Policy, argues that (i) transformation since 1990s of financial markets increases use of repo-type collateral & (ii) limits central bank’s policy space. Presentation slides here: https://syntheticassets.files.wordpress.com/2021/02/sissoko-ypfs-feb-17-2021-presentation.pdf 1/
Limits CB policy space (i) by super-charging standard monetary rate-setting policy, making it hard to raise interest rates & (ii) by generating collateral-driven crises that force the central bank to support long-term debt markets. 2/
As @KatharinaPistor argues this new financial regime is *designed* to take advantage of central bank liquidity provision and to direct it to the support of asset-owners. We need to find a way to restructure our financial system to serve borrowers not just asset-owners. 3/3
Video of panel with @miguelitoj89 and @steffenmurau at the #nextgenerationcentralbanking conference is here:
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