Sizing Up Repo

Authors

  • ARVIND KRISHNAMURTHY,

  • STEFAN NAGEL,

  • DMITRY ORLOV

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    • Krishnamurthy is with the Stanford University Graduate School of Business and NBER; Nagel is with the Ross School of Business and Department of Economics at the University of Michigan, CEPR, and NBER; and Orlov is with Simon School of Business at University of Rochester. We thank Peter Crane for providing data, and we are grateful for comments from Anat Admati, Tobias Adrian, Jeremy Bulow, Anna Cieslak, Darrell Duffie, Michael Fleming, Jacob Goldfield, Gary Gorton, Antoine Martin, Atif Mian, David Plecha, Philipp Schnabl, as well as seminar participants at the Bank of Canada, Dartmouth, DePaul, University of Florida, Goethe University Frankfurt, Harvard, Loyola, New York Fed, Northwestern, University of Lugano, University of Minnesota, UNC Chapel Hill, UC San Diego, University of Southern California, Stanford, Wharton, WU Vienna, University of Zurich, the American Economic Association Meetings, the NBER Monetary Economics and Capital Markets and the Economy workshops, the Stanford Institute for Theoretical Economics, and the Western Finance Association Meetings.


ABSTRACT

To understand which short-term debt markets experienced “runs” during the financial crisis, we analyze a novel data set of repurchase agreements (repo), that is, loans between nonbank cash lenders and dealer banks collateralized with securities. Consistent with a run, repo volume backed by private asset-backed securities falls to near zero in the crisis. However, the reduction is only $182 billion, which is small relative to the stock of private asset-backed securities as well as the contraction in asset-backed commercial paper. While the repo contraction is small in aggregate, it disproportionately affected a few dealer banks.

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