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A Central Bank's Optimal Balance Sheet Size?

Charles A Goodhart

No 12272, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Unlike other facets of monetary policy renormalisation, there has been little discussion yet of what principles should determine the optimum size of a Central Bank's balance sheet, the end-point to which on-going portfolio reductions should approach. In this note I start by addressing the arguments of those who would leave this balance sheet very large, much as now; and then continue with the counter-arguments, also stressing the nature of the relationships between monetary and fiscal policies, and between the Central Bank and the Treasury's Debt Management Office.

Keywords: auction risk; Central Bank Balance Sheet; Debt Management; interest rate risk; liquidity; Monetary Policy Renormalisation; QE (search for similar items in EconPapers)
JEL-codes: E50 E52 E63 H63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2017-09
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