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Fiscal Implications of the Federal Reserve's Balance Sheet Normalization

Michele Cavallo, Marco Del Negro (), W. Scott Frame, Jamie Grasing, Benjamin Malin () and Carlo Rosa
Additional contact information
Michele Cavallo: Federal Reserve Board
W. Scott Frame: Federal Reserve Bank of Dallas
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
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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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