Safe Asset Shortage and Collateral Reuse

The reuse of collateral can support the efficient allocation assets in financial system. Exploiting a novel dataset, we quantify banks' at security level. We show that banks substantially increase their response to scarcity induced by central bank asset purchases. Repo rates are less sensitive purchase-induced low levels reuse, when banking system easily supply through reuse. more and volatile high highlighting trade-off between shock absorption amplification effects