The (impossible) repo trinity: the political economy of repo markets

By Daniela Gabor. 2016

200 citations recorded by the source corpus.

ABSTRACT In its capacity as debt issuer, the state has played a growing role in financial life over the last 30 years. To examine this role and connect it to shadow banking, the paper develops the concept of the ‘repo trinity’, which captures a set of policy objectives that central banks outlined after the 1998 Russian crisis, the first systemic crisis of collateral-based finance. The repo trinity connected financial stability with liquid government bond markets and free repo markets. It further reinforced the dominance of the US government bond market as institutional template for states adjusting to a world of independent central banks, market-based financing and global competition for liquidity. Central banks and the Financial Stability Board recognized the impossible nature of the trinity after 2008, attributing cyclical leverage (financial instability) and elusive liquidity in collateral markets to deregulated repo markets, markets systemic to shadow banking. The new approach triggered radical changes in crisis central banking but has not powered significant regulatory interventions in the absence of an alternative mode of organizing government bond markets.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/6456445660f714f16d2fc2b8e068c5fed9182a07

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Citations in the corpus

Governing through financial markets: Towards a critical political economy of Capital Markets Union (2018, methodology): “Recent research has highlighted the role of private actors as key drivers of these changes (Gabor 2016b; Hardie et al., 2013a: 697; Lysandrou and Nesvetailova, 2015).”
Black Swans, Lame Ducks, and the mystery of IPE's missing macroeconomy (2017, background): “See also Gabor and Ban (2015), Gabor (2016), Ban, Seabrooke and Freitas (2016), and Helgadottir (2016).”
Central banking and the infrastructural power of finance: the case of ECB support for repo and securitization markets (2020, background): “Crucially, while central banks choose instruments on the basis of existing financial market conditions, their structural position as the monopoly suppliers of reserves means that these choices are themselves major drivers of financial market development (Gabor, 2016b, pp. 974–982).”
Speculation: a political economy of technologies of imagination (2020, background): “This has contributed to new asset bubbles and volatile booms and busts in the Global South and austerity across the world (Gabor, 2016; Ioannou et al., in press).”
Critical macro-finance: A theoretical lens (2020, unknown): “Similarly, CMF enables us to explore the turn to private finance in international development: an emerging ‘Wall Street Consensus’ (Gabor, 2020) that pushes for the privatization of public infrastructure via PublicPrivate Partnerships that would then be packaged into ‘investable development assets’ ”