The safe asset, banking equilibrium, and optimal central bank monetary, prudential and balance-sheet policies

Michael Magill, Martine Quinzii and Jean Rochet

Journal of Monetary Economics, 2020, vol. 112, issue C, 113-128

Abstract: A simple equilibrium model is presented which permits the joint study of optimal Central Bank prudential, monetary and balance sheet policies in the pre and post 2008 Crisis periods. It explains the new policies—the purchase of risky securities (QE), payment of interest on reserves (IR) and use of reverse repo (RRP)—as the response to the lack of safe assets in the economy, and shows why these policies were not needed to achieve optimality before 2008, but were needed for the 2008 Crisis and thereafter.

Keywords: Banking equilibrium; Capital requirements; Prudential policy; Monetary policy; Balance sheet policy; Quantitative easing; Interest on reserves (search for similar items in EconPapers)
JEL-codes: D E G (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393219300418
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:112:y:2020:i:c:p:113-128

DOI: 10.1016/j.jmoneco.2019.02.002

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().