The (Other) Deleveraging

July 1, 2012

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Format: Chicago

Manmohan Singh. The (Other) Deleveraging, (USA: International Monetary Fund, 2012) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Deleveraging has two components--shrinking of balance sheets due to increased haircuts/shedding of assets, and the reduction in the interconnectedness of the financial system. We focus on the second aspect and show that post-Lehman there has been a significant decline in the interconnectedness in the pledged collateral market between banks and nonbanks. We find that both the collateral and its associated velocity are not rebounding as of end-2011 and still about $4-5 trillion lower than the peak of $10 trillion as of end-2007. This paper updates Singh (2011) and we use this data to compare with the monetary aggregates (largely due to QE efforts in US, Euro area and UK), and discuss the overall financial lubrication that likely impacts the conduct of global monetary policy.

Subject: Banking, Collateral, Expenditure, Financial institutions, Financial statements, Hedge funds, Pension spending, Public financial management (PFM), Securities

Keywords: Bank, Client collateral, Collateral, Collateral Received, Deleveraging, Europe, Financial statements, Global, Hedge fund, Hedge funds, Hong Kong hedge fund, Monetary policy, Pension spending, Pledged collateral, Rehypothecation, Remains idle, Securities, Securities lending, Taylor rule, Velocity of collateral, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/179
Stock No:

WPIEA2012179
ISBN:

9781475505276
ISSN:

1018-5941

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