ABSTRACT
Our work on "reverse" monetary policy transmission is the first analytic work on how transmission takes place from collateral in the market to short-term market rates (Singh and Goel 2019). The use of long-dated securities as collateral for short tenors-for example, in securities lending, derivatives, repo markets, and prime brokerage funding-also impacts the risk premia (or moneyness) along the yield curve. In this article, we show that transactions using long-dated collateral, post-Lehman (i.e., following the bankruptcy of Lehman Brothers on September 15, 2008), are fewer, and have adversely impacted the transmission to short-term market rates. Our results suggest that the unwind of central bank balance sheets will likely strengthen the monetary policy transmission.