Foreword

Stijn Claessens

Manmohan Singh has been at the forefront of those who have raised the increasing importance of collateral and has, over the years, consistently analysed the dynamics of the market for collateral and its implication for financial markets and monetary policy. His writings and presentations have attracted the attention of policy makers and academics.

His newest book expands on his past work and introduces new dimensions previously underappreciated. His analysis is clear and his writing on this complex topic is lucid and easily digested.

In this book, he revisits his original work on the essential role of collateral in modern financial systems. He makes clear again how the essential role of collateral in the plumbing can have large macroeconomic consequences, yet is affected by many balance sheets in the financial system and related constraints. He makes you understand how the links between the various actors in the financial system – banks, money-market funds, hedge funds and other non-bank financial institutions – depend on collateral. And he shows that the use of collateral makes one have to revisit the notion of leverage. Importantly, he demonstrates that the concept of

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