Discussion paper

DP12272 A Central Bank’s Optimal Balance Sheet Size?

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.

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Citation

Goodhart, C (2017), “DP12272 A Central Bank’s Optimal Balance Sheet Size?”, CEPR Press Discussion Paper No. 12272. https://cepr.org/publications/dp12272