TY - JOUR
T1 - When does a central bank's balance sheet require fiscal support?
AU - Del Negro, Marco
AU - Sims, Christopher A.
N1 - Publisher Copyright:
© 2015.
PY - 2015/7/1
Y1 - 2015/7/1
N2 - Using a simple, general equilibrium model, we argue that it would be appropriate for a central bank with a large balance sheet composed of long-duration nominal assets to have access to, and be willing to ask for, support for its balance sheet by the fiscal authority. Otherwise its ability to control inflation may be at risk. This need for balance sheet support - a within-government transaction - is distinct from the need for fiscal backing of inflation policy that arises even in models where the central bank's balance sheet is merged with that of the rest of the government.
AB - Using a simple, general equilibrium model, we argue that it would be appropriate for a central bank with a large balance sheet composed of long-duration nominal assets to have access to, and be willing to ask for, support for its balance sheet by the fiscal authority. Otherwise its ability to control inflation may be at risk. This need for balance sheet support - a within-government transaction - is distinct from the need for fiscal backing of inflation policy that arises even in models where the central bank's balance sheet is merged with that of the rest of the government.
KW - Central bank's balance sheet
KW - Monetary policy
KW - Solvency
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U2 - 10.1016/j.jmoneco.2015.05.001
DO - 10.1016/j.jmoneco.2015.05.001
M3 - Article
AN - SCOPUS:84937520197
SN - 0304-3932
VL - 73
SP - 1
EP - 19
JO - Carnegie-Rochester Confer. Series on Public Policy
JF - Carnegie-Rochester Confer. Series on Public Policy
ER -