[6] See, e.g., Brand, C., Ferrante, L., and Hubert, A. (2019), “From Cash- to Securities-Driven Euro Area Repo Markets: The Role of Financial Stress and Safe Asset Scarcity”, ECB Working Paper No. 2232. [7] Regulatory changes have also led to a higher demand for collateral assets. The implications of the increasing role of collateral in financial markets for financial stability and monetary policy are reviewed in Corradin, S., Heider, F. and Hoerova, M. (2017), “On Collateral: Implications for Financial Stability and Monetary Policy”, ECB Discussion Paper No. 2107. [8] For a discussion of the role played by the CCPs in counterparty risk insurance and collateral saving, see, e.g., Biais, B., Heider, F. and Hoerova, M. (2012), “Clearing, Counterparty Risk and Aggregate Risk”, IMF Economic Review, 60(2), pp. 193-222. [9] Excess liquidity refers to central bank liquidity provision in excess of bank minimum reserve requirements and autonomous factors. [10] Eisenschmidt, J., Ma, Y. and Zhang, A. L. (2020), “Monetary Policy Transmission in Segmented Markets”, Working Paper. [11] Duffie, D. and Krishnamurthy, A. (2016), “Passthrough Efficiency in the Fed’s New Monetary Policy Setting”, in Designing Resilient Monetary Policy Frameworks for the Future, Federal Reserve Bank of Kansas City, Jackson Hole Symposium. The index compares deviations of each of the short-term (overnight) money market rates from Chart 2 to the volume-weighted mean rate, and creates a volume-weighted index of these deviations. The index for the euro area shown in Chart 4 is from Corradin et al. (2020), op. cit.

Other drivers of the turmoil included regulation and bank internal risk management limits, as well as concentrated reserve holdings (with a few banks holding large amounts of reserves). Despite the lack of contagion to the euro area in this episode, it is a relevant lesson to consider for future euro area monetary policy normalisation (while bearing in mind that concentration of reserves in the United States is structurally higher than in the euro area). [19] History can provide an interesting perspective and the paper by Anderson, Chang and Copeland (2020) featured in this conference examines the effects of central bank liquidity provision during the 1918 Influenza Pandemic; see Anderson, H., Chang, J.-W. and Copeland, A. (2020), “The Effect of the Central Bank Liquidity Support during Pandemics: Evidence from the 1918 Influenza Pandemic”, Working Paper. [20] For a model in which the distribution of excess liquidity among banks matters for the money market dynamics see Afonso, A., Armenter, R. and Lester, B. (2019), “A Model of the Federal Funds Market: Yesterday, Today, and Tomorrow,” Review of Economic Dynamics 33, pp. 177-204. [21] For an analysis of scarcity effects see Arrata, W., Nguyen, B., Rahmouni-Rousseau, I. and Vari, M. (2019), “The Scarcity Effect of Quantitative Easing on Repo Rates: Evidence from the Euro Area”, Journal of Financial Economics, 137(3), pp. 837-856; and Corradin,  https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp201123~8d9573b1b1.en.html  6/7  24/11/2020  Shifting tides in euro area money markets: from the global financial crisis to the COVID-19 pandemic  S., and Maddaloni, A.