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Transmission of asset purchases: the role of reserves

Jens Christensen () and Signe Krogstrup

FRBSF Economic Letter, 2015

Abstract: The Swiss National Bank expanded bank reserves as part of its unconventional monetary policy during the European sovereign debt crisis. The unprecedented expansion involved short-term rather than long-term asset purchases. This approach provides novel insights into how central bank balance sheet expansions affect interest rates. In particular, it illustrates how an expansion of reserves can lower long-term yields through a reserve-induced portfolio balance effect that is independent of the assets purchased.

Date: 2015
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Handle: RePEc:fip:fedfel:00060