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The central bank balance sheet as a policy tool: past, present and future

Andrew Bailey, Jonathan Bridges (), Richard Harrison (), Josh Jones () and Aakash Mankodi ()
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Andrew Bailey: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Josh Jones: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Aakash Mankodi: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 899, Bank of England working papers from Bank of England

Abstract: This paper focuses on what has been learned from the past decade of previously unconventional monetary policy measures and the emerging lessons from the effects of monetary policy responses to the Covid shock. The paper explores two observations from recent quantitative easing (QE) policies in detail. First, large QE programmes implemented quickly may be particularly effective in times of market dysfunction. Second, a rapid pace of asset purchases may also enhance QE effectiveness during these periods. These observations suggest a particular form of ‘state contingency’ for the impact of QE. The paper analyses the potential implications of such state contingency for the appropriate conduct of QE policies and the choice of policy instruments in more normal times. The paper also outlines some potential implications for future central bank balance sheet policies and the operational framework to support them.

Keywords: Monetary policy; financial stability; central bank balance sheet; quantitative easing; reserves (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2020-12-18
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0899

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