Working Paper Series no. 339: L’impact de la politique monétaire conventionnelle sur le marché du collatéral : le cas du marché des titres français (en anglais)

Abstract

We consider the channel consisting in transferring the credit risk associated with refinancing operations between financial institutions to market participants. In particular, we analyze liquidity and volatility premia on the French government debt securities market, since these assets are used as collateral both in the open market operations of the ECB and on the interbank market. In our time-varying transition probability Markov-switching (TVTP-MS) model, we highlight the existence of two regimes. In one of them, which we refer to as the conventional regime, monetary policy neutrality is verified; in the other, which we dub the unconventional regime, monetary policy operations lead to volatility and liquidity premia on the collateral market. The existence of these conventional and unconventional regimes highlights some asymmetries in the conduct of monetary policy.

Sanvi Avouyi-Dovi and Julien Idier
August 2011

Classification JEL : G10; C22; C53

Keywords : Monetary policy; Collateral; Liquidity; Volatility; French bond market