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Collateral Policy—Central Banking’s Powerful Secret Ingredient

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Swiss Finance Institute
Saturday, July 1, 2017 - 11:00

Modern economies run on the back of a monetary and financial system through which most transactions ultimately settle in central-bank money. As the ultimate issuers of money, central banks are imbued with substantial power to influence financial markets and the real economy. It is important to understand how they use this power and the associated implications. While public attention focuses on interest-rate policy, central banks also set policy in another sphere of influence that is more closely linked to the money-creation process, namely with respect to the collateral against which they issue money to banks.

Swiss Finance Institute Professor Kjell G. Nyborg sheds light on this «powerful secret ingredient» of central banking in his new book Collateral Frameworks: The Open Secret of Central Banks and discusses its implications for the financial system, the economy, and society.

A short summary of his insights is now available in the most recent edition of the International Banker Magazine.

Read other related posts on this topic:
Das offene Geheimnis der Zentralbanken
The Role of Collateral Frameworks in the Aftermath of the Financial Crisis
How Central Banks Control More Than You Think
The Absence of Market Forces at the Heart of the Monetary System
ECB’s Liquidity Injections Distort the Economy
Never Heard of Collateral Frameworks? You’re not Alone