The Fed’s Balance Sheet Runoff: The Role of Levered NBFIs and Households

Marco Cipriani, James A. Clouse, Lorie Logan, Antoine Martin and Will Riordan
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James A. Clouse: https://www.federalreserve.gov/econres/james-a-clouse.htm

No 20220412, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: In a Liberty Street Economics post that appeared yesterday, we described the mechanics of the Federal Reserve’s balance sheet “runoff” when newly issued Treasury securities are purchased by banks and money market funds (MMFs). The same mechanics would largely hold true when mortgage-backed securities (MBS) are purchased by banks. In this post, we show what happens when newly issued Treasury securities are purchased by levered nonbank financial institutions (NBFIs)—such as hedge funds or nonbank dealers—and by households.

Keywords: balance sheet runoff; Federal Reserve; money market funds (MMFs); nonbank financial institutions (NBFIs); treasuries (search for similar items in EconPapers)
JEL-codes: E5 G51 (search for similar items in EconPapers)
Date: 2022-04-12
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
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