We assess the quantitative implications of the re-use of collateral on financial market leverage, volatility, and …-use frees up collateral that can be used to back more transactions. Re-use thus contributes to the build-up of leverage and … significantly increases volatility in financial markets. When introducing limits on re-use, we find that volatility is strictly …

We assess the quantitative implications of collateral re-use on leverage, volatility, and welfare within an infinite …-horizon asset-pricing model with heterogeneous agents. In our model, the ability of agents to reuse frees up collateral that can be … used to back more transactions. Re-use thus contributes to the buildup of leverage and significantly increases volatility in …