The Political Economy of Institutional Change in the Payment System and Monetary Policy

Schmitz, Stefan W.

doi:10.2139/ssrn.944404

SSRN Journal

2006

DOI: 10.2139/ssrn.944404

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The Political Economy of Institutional Change in the Payment System and Monetary Policy

Stefan W. Schmitz

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Cited by 2 publications

References 26 publications

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The Impact of the Liquidity Coverage Ratio (LCR) on the Implementation of Monetary Policy

Schmitz

2013

Economic Notes

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In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the Liquidity Coverage Ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to survive a 30-day period of market stress. As monetary policy typically involves targeting the interest rate on loans of one of these assets-central bank reserves-it is important to understand how this regulation may impact the efficacy of central banks' current operational frameworks. We extend a standard model of monetary policy implementation in a corridor system to include term funding and an LCR requirement. When banks face the possibility of an LCR shortfall, we show that it becomes more challenging for a central bank to control the overnight interest rate and that the very short end of the yield curve becomes steeper. These results suggest that central banks may want to adjust their operational frameworks as the new regulation is implemented. JEL classification: E43, E58, G28

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The Impact of the Liquidity Coverage Ratio (LCR) on the Implementation of Monetary Policy

Schmitz

2013

Economic Notes

Self Cite

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The Impact of the Basel III Liquidity Standards on the Implementation of Monetary Policy

Schmitz

2011

SSRN Journal

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The Political Economy of Institutional Change in the Payment System and Monetary Policy

Cited by 2 publications

References 26 publications

The Impact of the Liquidity Coverage Ratio (LCR) on the Implementation of Monetary Policy

The Impact of the Liquidity Coverage Ratio (LCR) on the Implementation of Monetary Policy

The Impact of the Basel III Liquidity Standards on the Implementation of Monetary Policy

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