DP12272 A Central Bank's Optimal Balance Sheet Size?
|Author(s):||Charles A Goodhart|
|Publication Date:||September 2017|
|Keyword(s):||auction risk, central bank balance sheet, Debt Management, interest rate risk, liquidity, Monetary Policy Renormalisation, QE|
|JEL(s):||E50, E52, E63, H63|
|Programme Areas:||Monetary Economics and Fluctuations|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=12272|
Unlike other facets of monetary policy renormalisation, there has been little discussion yet of what principles should determine the optimum size of a Central Bank's balance sheet, the end-point to which on-going portfolio reductions should approach. In this note I start by addressing the arguments of those who would leave this balance sheet very large, much as now; and then continue with the counter-arguments, also stressing the nature of the relationships between monetary and fiscal policies, and between the Central Bank and the Treasury's Debt Management Office.