What happened since Wednesday in the US repo money markets? Why did banks have to borrow $15.1bn from the Fed's recent lending facility? Could we see this coming? What does it imply for QT? (good clues in this thread...) [1/5] https://www.ft.com/content/606... via @ft
A few economists have been thinking about an event like this: its causes, consequences, and implications for the Fed's balance sheet. Disclosure: I'm one of them, and gave the @ecb lecture at the meetings of the @econometricsoc in Dec 2023 on the topic https://youtu.be/a5gCTWZTrHg
Three weeks ago, I organized a small conference with Huberto Ennis and Alex Wolman on this topic at the @RichmondFed. It is not a coincidence that every paper on the conference is relevant to understand what has happened in money markets since Wednesday https://www.richmondfed.org/co...
-- Why does QT and the shrinking balance sheet makes events like the last few days more likely? (See the Lagos and La Spada papers) -- Why does uncertainty about the demand for money by banks justify keeping the Fed's balance sheet at around $3tr to avoid these events? (La Spada
You can easily find the papers in the authors' websites if you want to get the answers. Putting in some work to read them and think through their points, you will get the answers to the questions in this thread. Or, you can enroll at @LSEnews and take one of my courses 😃
@R2Rsquared @FT Ricardo it would be nice if could give a synopsis of your thoughts!