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Liquidity Ratios as Monetary Policy Tools
Some Historical Lessons for Macroprudential Policy

by Eric Monnet and Miklos Vari

Series:Working Paper No. 19/176
ISBN 9781498320474
Code: #WPIEA2019176

Publication year: 2019

Cdn: $27.00; US: $25.00
Paperback
Language: English
48 pages
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This paper explores what history can tell us about the interactions between macroprudential and monetary policy. Based on numerous historical documents, we show that liquidity ratios similar to the Liquidity Coverage Ratio (LCR) were commonly used as monetary policy tools by central banks between the 1930s and 1980s. We build a model that rationalizes the mechanisms described by contemporary central bankers, in which an increase in the liquidity ratio has contractionary effects, because it reduces the quantity of assets banks can pledge as collateral. This effect, akin to quantity rationing, is more pronounced when excess reserves are scarce.
Liquidity Ratios as Monetary Policy Tools
Cdn: $27.00; US: $25.00
International Monetary Fund (IMF) BookID: 125662 Added: 2019.8.16