Kaldorf, Matthias; Wicking, Florian - 2021 - This version: February 28, 2021, first version: October 30, 2020
if they are eligible as collateral, and firms increase their leverage and default risk in response. This has adverse … empirical evidence. The central bank faces a trade-off between fostering collateral supply and increased risk-taking on the … that reducing eligibility requirements from A- to BBB- increases collateral supply by 33%, while collateral default risk …
