Central Bank Balance Sheet Policies and Inflation Expectations
Jan Willem End () and
Christiaan Pattipeilohy ()
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Christiaan Pattipeilohy: De Nederlandsche Bank
Open Economies Review, 2017, vol. 28, issue 3, No 5, 499-522
Abstract We analyse the empirical effects of credit easing and quantitative easing on inflation expectations and exchange rates. Both monetary policy strategies are summarised in measures for composition and size of the central bank balance sheet and are included in a VAR model. The results show that changes in balance sheet size had positive, albeit weak effects on inflation expectations in Japan, while the effects were negligible in the euro area. By contrast, an increasing balance sheet size is associated with reduced short-term inflation expectations in the US and UK, pointing at negative signalling effects. Shocks to balance sheet size or composition have no substantial effects on long-term inflation expectations in the euro area, US and UK. An expanding balance sheet size is associated with a depreciation of the euro, pound sterling and Japanese yen.
Keywords: Central banks and their policies; Monetary policy (search for similar items in EconPapers)
JEL-codes: E58 E52 (search for similar items in EconPapers)
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Working Paper: Central bank balance sheet policies and inflation expectations (2015)
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