Kaldorf, Matthias; Wicking, Florian - 2021 - This version: February 28, 2021, first version: October 30, 2020
We study the eligibility of corporate bonds as collateral for central bank operations and its effect on interbank and … collateral policies must also account for endogenous responses of the corporate sector: banks increase demand for corporate bonds … if they are eligible as collateral, and firms increase their leverage and default risk in response. This has adverse …
