Central banks should prepare to deal with sharp drops in liquidity, IMF says
Central banks may be able to use collateral policies to deal with crises
Central banks should stand ready to deal with sudden liquidity crises, as liquidity risks are on the rise in some markets, the International Monetary Fund (IMF) says in a chapter of its Global Financial Stability Report, published today (September 29).
Various factors are coming together to reduce both the level and resilience of liquidity in some, but not all, markets, says the IMF. The fund points to the growing divide between the plentiful liquidity of investment grade securities, and their
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