Fiscal implications of the Federal Reserve's balance sheet normalization

Arbeitspapier

The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the current amount) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 percent to under 5 percent. Further reducing longer-run reserve balances from $1 trillion to pre-crisis levels has little effect on the likelihood of net losses.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 833

Classification and Topics

• Classification: Wirtschaft ; Central Banks and Their Policies ; Monetary Policy, Central Banking, and the Supply of Money and Credit: Other ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: Other
• Subject: central bank balance sheets ; monetary policy ; remittances ; Zentralbank ; Bankrechnungslegung ; Bilanzpolitik ; Geldpolitik ; Gewinnverwendung ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cavallo, Michele ; Del Negro, Marco ; Frame, W. Scott ; Grasing, Jamie ; Malin, Benjamin A. ; Rosa, Carlo
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/189874
• Last update: 10.03.2025, 11:46 AM CET