Measuring the quality of eligible collateral

Arbeitspapier

Recently, the U. S. subprime crisis has shown that a weak collateralization of credits may have massive economic implications, entailing severe perturbations of the international financial system. We focus on central bank lending and try to pin down the quantitative impact of the collateralization of central banks' credits. A questionnaire on national monetary frameworks was used to collect data from central banks. Drawing on these data we derive an index of the quality of eligible assets measuring the minimum requirements for the issue of money by the respective central bank. We provide data for 62 countries and we show that this index has the potential to affect monetary stability as measured by national inflation rates. The existence of a correlation between inflation and the quality of eligible collateral would strongly support fundamental claims of property economics, an economic theory based on a clear cut distinction between property and possession. Property economics emphasizes the role of collateralized lending in explaining the process of money creation and, more generally, the emergence of any economic activity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ROME Discussion Paper Series ; No. 08-03

Classification and Topics

• Classification: Wirtschaft ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Current Heterodox Approaches: Other ; Index Numbers and Aggregation; Leading indicators
• Subject: Monetary economics ; monetary theory ; inflation ; collateral ; central banks ; property ; property economics ; central bank independence ; index construction

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lehmbecker, Philipp ; Missong, Martin
• Event: Veröffentlichung
• (who): Research On Money in the Economy (ROME)
• (where): s.l.
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/88225
• Last update: 10.03.2025, 11:43 AM CET