Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization

Cavallo, Michele; Del Negro, Marco; Frame, W. Scott; Grasing, Jamie; Malin, Benjamin A.; Rosa, Carlo

Discussion Paper

Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization

Abstract: In the wake of the global financial crisis, the Federal Reserve dramatically increased the size of its balance sheet—from about $900 billion at the end of 2007 to about $4.5 trillion today. At its September 2017 meeting, the Federal Open Market Committee (FOMC) announced that—effective October 2017—it would initiate the balance sheet normalization program described in the June 2017 addendum to the FOMC’s Policy Normalization Principles and Plans.

Keywords: central bank balance sheets; remittances; monetary policy;

JEL Classification: E5;