Fluctuations in the Treasury General Account and their effect on the Fed’s balance sheet

Vissing-Jørgensen, Annette

No 21885, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The US government’s demand for bank deposits is large and volatile and takes the form of the Treasury General Account (TGA) at the Federal Reserve. I study drivers of TGA volatility and how the Federal Reserve should adjust its balance sheet in response to this volatility. Using interest rate control, control of the Fed’s overall policy stance, and communication as criteria, an approach of backing the TGA with Treasury bills (or other short-maturity assets) and adjusting bill holdings with TGA fluctuations outperforms the current ample reserves policy of letting reserves plus overnight reverse repo balances adjust passively to TGA changes.

Keywords: Money; creation; -; bank; deposits; -; capital; regulation; -; zero; lower; bound; -; monetary; policy; -; price; rigidities (search for similar items in EconPapers)
JEL-codes: E42 E52 (search for similar items in EconPapers)
Date: 2026-08
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