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Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization

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Abstract
In the wake of the global financial crisis, the Federal Reserve dramatically increased the size of its balance sheet—from about $900 billion at the end of 2007 to about $4.5 trillion today. At its September 2017 meeting, the Federal Open Market Committee (FOMC) announced that—effective October 2017—it would initiate the balance sheet normalization program described in the June 2017 addendum to the FOMC’s Policy Normalization Principles and Plans.

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  • Michele Cavallo & Marco Del Negro & W. Scott Frame & Jamie Grasing & Benjamin A. Malin & Carlo Rosa, 2018. "Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization," Liberty Street Economics 20180109, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87232
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    Cited by:

    1. Lorenzo Esposito & Giuseppe Mastromatteo, "undated". "In the Long Run We Are All Herd: On the Nature and Outcomes of the Beauty Contest," Economics Working Paper Archive wp_972, Levy Economics Institute.
    2. Niwa, Hidekazu, 2024. "A fiscal theory of central bank’s solvency: Perils of the quantitative and qualitative monetary easing," Japan and the World Economy, Elsevier, vol. 70(C).
    3. Jörg Bibow, 2018. "Unconventional monetary policies and central bank profits," IMK Studies 62-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Huixin Bi & Wenyi Shen & Shu‐Chun S. Yang, 2022. "Fiscal implications of interest rate normalization in the United States," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 868-904, May.
    5. Sayuri Shirai & Eric Alexander Sugandi, 2019. "Cross-Border Portfolio Investment and Financial Markets Development in the Asia and Pacific Region," International Business Research, Canadian Center of Science and Education, vol. 12(5), pages 14-33, May.
    6. Sayuri Shirai & Eric Alexander Sugandi, 2018. "Cross- Border Portfolio Investment and Financial Integration in Asia and the Pacific Region," Working Papers id:12817, eSocialSciences.
    7. Shirai, Sayuri & Sugandi, Eric, 2018. "Cross-Border Portfolio Investment and Financial Integration in Asia and the Pacific Region," ADBI Working Papers 841, Asian Development Bank Institute.
    8. Joseph G. Haubrich, 2023. "Federal Reserve Balance-Sheet Policy in an Ample Reserves Framework: An Inventory Approach," Working Papers 23-25, Federal Reserve Bank of Cleveland.
    9. Hess T. Chung & Etienne Gagnon & Taisuke Nakata & Matthias Paustian & Bernd Schlusche & James Trevino & Diego Vilán & Wei Zheng, 2019. "Monetary Policy Options at the Effective Lower Bound : Assessing the Federal Reserve's Current Policy Toolkit," Finance and Economics Discussion Series 2019-003, Board of Governors of the Federal Reserve System (U.S.).
    10. Benjamín García & Arsenios Skaperdas, 2024. "Central Bank Independence at Low Interest Rates," Working Papers Central Bank of Chile 1003, Central Bank of Chile.
    11. Mark A. Carlson & Stefania D'Amico & Cristina Fuentes-Albero & Bernd Schlusche & Paul R. Wood, 2020. "Issues in the Use of the Balance Sheet Tool," Finance and Economics Discussion Series 2020-071, Board of Governors of the Federal Reserve System (U.S.).
    12. Fegatelli, Paolo, 2024. "Monetary policy and reserve requirements with a zero-interest digital euro," Journal of Macroeconomics, Elsevier, vol. 80(C).
    13. Michal Franta & Tomas Holub & Branislav Saxa, 2018. "Balance Sheet Implications of the Czech National Bank's Exchange Rate Commitment," Working Papers 2018/10, Czech National Bank.
    14. Joerg Bibow, 2018. "Unconventional Monetary Policies and Central Bank Profits: Seigniorage as Fiscal Revenue in the Aftermath of the Global Financial Crisis," Economics Working Paper Archive wp_916, Levy Economics Institute.
    15. Hess Chung & Etienne Gagnon & Taisuke Nakata & Matthias Paustian & Bernd Schlusche & James Trevino & Diego Vilán & Wei Zheng, 2020. "Monetary Policy Options at the Effective Lower Bound: Assessing the Federal Reserve’s Current Policy Toolkit," CARF F-Series CARF-F-483, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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    More about this item

    Keywords

    central bank balance sheets; remittances; monetary policy;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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