Repo operations such instrument of monetary policy

Temjanovski, Riste and Temjanovska, Violeta (2008) Repo operations such instrument of monetary policy. Зброник на трудови - Proceedings. pp. 113-127.

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Abstract

In repo transactions, securities are exchanged for cash with an agreement to repurchase the securities at a future date. The securities serve as collateral for what is effectively a cash loan and, conversely, the cash serves as collateral for a securities loan. Repo can be used either to obtain funds or obtain securities. In addition, repos can be used for leverage, to fund long positions in securities and to fund short positions for hedging interest rate risks. Repo are useful to central banks both as a monetary policy instrument and as a source of information on market expectations. Repos are attractive as a monetary policy instrument because they carry a low credit risk while serving as a flexible instrument for liquidity management. Repo markets can also provide central banks with information on very short term interest rate expectations that is relatively accurate since the credit risk premium in repo rates is tipically small. In this respect, they complement information on expectations over a longer horizont derived from securities with longer maturities.

Item Type: Article
Subjects: Social Sciences > Economics and business
Divisions: Faculty of Economics
Depositing User: Riste Temjanovski
Date Deposited: 17 Dec 2012 09:16
Last Modified: 17 Dec 2012 09:16
URI: http://eprints.ugd.edu.mk/id/eprint/3722

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