We present a model of central bank collateralized lending to study the optimal choice of the haircut policy. We show … agents on the other. We argue that the optimal haircut is higher when the central bank is unable to lend exclusively to … agents who actually need liquidity. Finally, for an unexpected drop in the haircut, the central bank can be more aggressive …

The market for central bank reserves is mainly over-the-counter and exhibits a core-periphery network structure. This … trade in the interbank market. Relationships matter for banks' bidding strategies at the central bank auction and introduce … anomalies in the level of interest rates - namely, that banks sometimes trade above (below) the central bank's lending (deposit …

We use a simple model to study whether private payment systems based on bank deposits can provide the optimal level of … safety. In the model, bank deposits backed by projects are subject to default risk that can be mitigated by a depositor's ex … ante and ex post monitoring. Safe payment instruments issued by a narrow bank can also be used as a back-up payment system …