60 posts on "Central Bank"
July 10, 2017
How the Fed Changes the Size of Its Balance Sheet
The size of the Federal Reserve’s balance sheet increased greatly between 2009 and 2014 owing to large-scale asset purchases. The balance sheet has stayed at a high level since then through the ongoing reinvestment of principal repayments on securities that the Fed holds. When the Federal Open Market Committee (FOMC) decides to reduce the size of the Fed’s balance sheet, it is expected to do so by gradually reducing the pace of reinvestments, as outlined in the June 2017 addendum to the FOMC’s Policy Normalization Principles and Plans. How do asset purchases increase the size of the Fed’s balance sheet? And how would reducing reinvestments reduce the size of the balance sheet? In this post, we answer these questions by describing the mechanics of the Fed’s balance sheet. In our next post, we will describe the balance sheet mechanics with respect to agency mortgage-backed securities (MBS).
Posted at 7:00 am in Central Bank, Federal Reserve, Monetary Policy, Treasury | Permalink | Comments (8)
June 30, 2017
The Role of Central Bank Lending Facilities in Monetary Policy
Central bank lending facilities were vital during the financial crisis of 2007-08 when many banks and nonbank financial institutions turned to them to meet funding needs as private funding dried up. Since then, there has been renewed interest in the design of central bank lending facilities in the post-crisis period.
February 4, 2016
How Do Central Bank Balance Sheets Change in Times of Crisis?
The 2007-09 financial crisis, and the monetary policy response to it, have greatly increased the size of central bank balance sheets around the world.
February 3, 2016
What Is the Composition of Central Bank Balance Sheets in Normal Times?
There has been unusually high activity on central banks’ balance sheets in recent years.
May 9, 2014
October 4, 2013
Historical Echoes: A Central Bank by Any Other Name Is Still . . .
Amy Farber Perhaps you enjoy being read to out loud. Perhaps you enjoy being read to on subjects related to central banking. Perhaps you would enjoy being read the Wikipedia entries for central banks around the world. If so, and your reader was to read the following beginning sentences for central bank entries, you would […]
April 5, 2013
Historical Echoes: Central Bank and Paper Money Innovator Given Death Sentence for His Efforts
In 1668, Johan Palmstruch, the head of Stockholms Banco, the precursor to the oldest central bank still operating today—the Swedish Riksbank—was charged and sentenced to death, according to Wikipedia and the Riksbank.
March 23, 2012
Just Released: Chairman Bernanke Returns to His Academic Roots
Federal Reserve Chairman Ben Bernanke is back in the classroom this month to deliver a series of four lectures for undergraduate students at the George Washington School of Business in Washington, D.C.
Posted at 7:00 am in Central Bank, Education, Inflation, Monetary Policy, Recession | Permalink | Comments (2)
December 21, 2011
Central Bank Imbalances in the Euro Area
The euro area sovereign debt crisis sparked an outflow of bank deposits from countries in the periphery to commercial banks in Germany and other core countries.
Posted at 7:00 am in Banks, Central Bank, Euro Area, Financial Institutions, International Economics | Permalink | Comments (4)
March 30, 2011
Why Do Central Banks Have Discount Windows?
Though not literally a window any longer, the “discount window” refers to the facilities that central banks, acting as lender of last resort, use to provide liquidity to commercial banks. While the need for a discount window and lender of last resort has been debated, the basic rationale for their existence is that circumstances can arise, such as bank runs and panics, when even fundamentally sound banks cannot raise liquidity on short notice. Massive discount window borrowing in the immediate aftermath of the September 11 terrorist attack on the United States clearly illustrates the importance of a discount window even in a modern economy. In this post, we discuss the classical rationale for the discount window, some debate surrounding it, and the challenges that the “stigma” associated with borrowing at the discount window poses for the effectiveness of the discount window.
Posted at 10:03 am in Banks, Central Bank, Financial Institutions, Lender of Last Resort | Permalink
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