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Transmission of Quantitative Easing: The Role of Central Bank Reserves

Jens Christensen () and Signe Krogstrup

No 2015-06, Working Papers from Swiss National Bank

Abstract: We argue that the issuance of central bank reserves per se can matter for the effectof central bank large-scale asset purchases-commonly known as quantitative easing- on long-term interest rates. This effect is independent of the assets purchased, and runs through a reserve-induced portfolio balance channel. For evidence we analyze the reaction of Swiss long-term government bond yields to announcements by the Swiss National Bank to expand central bank reserves without acquiring any long-lived securities. We find that declines in long-term yields following the announcements mainly reflected reduced term premiums suggestive of reserve-induced portfolio balance effects.

Keywords: unconventional monetary policy; reserve-induced portfolio balance channel; term structure modeling (search for similar items in EconPapers)
JEL-codes: G12 E43 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2015
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Working Paper: Transmission of Quantitative Easing: The Role of Central Bank Reserves (2016) Downloads
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