The Collateral Channel of Open Market Operations

52 Pages Posted: 25 May 2016 Last revised: 12 Oct 2016

See all articles by Nuno Cassola

Nuno Cassola

University of Milan Bicocca - CefES; University of Lisbon - CEMAPRE

Francois Koulischer

University of Luxembourg

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2016


We build a model of collateral choice by banks to quantify how changes in the haircut policy of the central bank affect the collateral used by banks and the funding cost of banks. We estimate the model using data on assets pledged to the European Central Bank from 2009 to 2011. Our results suggest for example that a 5% higher haircut on low rated collateral would have reduced the use of this collateral by 10% but would have increased the average funding cost spread between high yield and low yield countries by 5% over our sample period.

Keywords: Collateral, Haircut, Central Bank, Money Market

JEL Classification: E52, E58, G01, F36

Suggested Citation

Cassola, Nuno and Koulischer, Francois, The Collateral Channel of Open Market Operations (May 1, 2016). Banque de France Working Paper No. 593, Available at SSRN:

Nuno Cassola (Contact Author)

University of Milan Bicocca - CefES ( email )


University of Lisbon - CEMAPRE ( email )


Francois Koulischer

University of Luxembourg ( email )

Kirchberg, 6, rue Richard Coudenhove-Kalergi

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