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A Central Bank’s Optimal Balance Sheet Size?

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  • Goodhart, Charles

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.

Suggested Citation

  • Goodhart, Charles, 2017. "A Central Bank’s Optimal Balance Sheet Size?," CEPR Discussion Papers 12272, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12272
    as

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    References listed on IDEAS

    as
    1. William A. Allen, 2017. "Quantitative Easing and the Independence of the Bank of England," National Institute Economic Review, National Institute of Economic and Social Research, vol. 241(1), pages 65-69, August.
    2. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
    3. Igor Goncharov & Vasso Ioannidou & Martin C. Schmalz, 2017. "(Why) Do Central Banks Care About Their Profits?," CESifo Working Paper Series 6546, CESifo.
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    More about this item

    Keywords

    Qe; Monetary policy renormalisation; Liquidity; Debt management; Interest rate risk; Auction risk; Central bank balance sheet;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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