Intraday Liquidity and Money Market Dislocation - Presentation #6, 16th Macro Finance Workshop

Intraday Liquidity and Money Market Dislocation
Discussant: Arvind Krishnamurthy (Stanford)

This paper investigates the pricing of repurchase agreements (repos) within the new post-crisis regulatory framework. We find that new liquidity regulation prevents banks from using intraday credit provisions from the Fed. As a consequence, reserve-rich banks—rather than the Fed—are the marginal provider of intraday liquidity to money markets. In this new regime, central bank reserves can suddenly become scarce and constrain the supply of repo, leading to sharp increases in repo rates.

Macro-finance addresses the link between asset prices and economic fluctuations. Macroeconomics (from the Greek prefix makro- meaning "large" + economics) is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole. Macroeconomists study topics such as GDP, unemployment rates, national income, price indices, output, consumption, unemployment, inflation, saving, investment, energy, international trade, and international finance. Asset prices are the prices for which financial instruments, such as stocks, bonds, currencies, etc., are bought and sold.

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