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Fiscal Implications of the Federal Reserve's Balance Sheet Normalization

Michele Cavallo, Marco Del Negro, W Frame, Jamie Grasing, Benjamin Malin and Carlo Rosa
Additional contact information
Michele Cavallo: Federal Reserve Board
Jamie Grasing: Federal Reserve Board

International Journal of Central Banking, 2019, vol. 15, issue 5, 255-306

Abstract: The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the amount when the Federal Reserve's balance sheet normalization program started) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 percent to less than 5 percent. Further reducing longer-run reserve balances from $1 trillion to pre-crisis levels has little effect on the likelihood of net losses.

JEL-codes: E58 E59 E69 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Fiscal Implications of the Federal Reserve's Balance Sheet Normalization (2018) Downloads
Working Paper: Fiscal Implications of the Federal Reserve's Balance Sheet Normalization (2018) Downloads
Working Paper: Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization (2018) Downloads
Working Paper: Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization (2018) Downloads
Working Paper: Fiscal Implications of the Federal Reserve's Balance Sheet Normalization (2018) Downloads
Working Paper: Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization (2018) Downloads
Working Paper: Fiscal implications of the Federal Reserve's balance sheet normalization (2018) Downloads
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