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Real Effects of Financial Market Integration: Evidence from an ECB Collateral Framework Change

SSRN, ISSN: 1556-5068
2022
  • 0
    Citations
  • 518
    Usage
  • 4
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    518
    • Abstract Views
      442
    • Downloads
      76
  • Captures
    4
  • Ratings
    • Download Rank
      640,402

Article Description

This paper studies the effects of harmonizing collateral policy in a monetary union. In 2007, the European Central Bank replaced national collateral lists with a single list specifying which assets euro area banks can pledge as collateral. Banks holding newly eligible assets experience a reduction in their cost of funding and increase loan supply compared to banks without such assets. The effect is driven by core banks increasing credit supply to riskier and less productive firms located in periphery countries. These firms in turn experience growth in employment and investment. Our results suggest that a harmonized collateral framework facilitates cross-border lending to borrowing-constrained firms and, thereby, increases financial market integration in a monetary union.

Bibliographic Details

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