DP12272 | A Central Bank’s Optimal Balance Sheet Size?

Author(s)

Publication Date

09/05/2017

JEL Code(s)

Keyword(s)

Programme Area(s)

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.