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Working Paper
How Does the Fed Adjust its Securities Holdings and Who is Affected?
The Federal Open Market Committee indicated in its September 2017 post-meeting statement that it will initiate in October a balance sheet normalization program to gradually reduce its securities holdings. This action will put in place a policy of reinvesting and redeeming portions of the principal payments received by the Federal Reserve from its holdings of Treasury and agency securities. How are these adjustments to the Federal Reserve?s securities holdings transacted and who is affected? This paper provides a primer regarding how the Federal Reserve accounts for these securities ...
Working Paper
Issues in the Use of the Balance Sheet Tool
This paper considers various ways of using balance sheet policy (BSP) to provide monetary policy stimulus, including the BSPs put in place by the Federal Reserve in the wake of the Global Financial Crisis, the choice between fixed-size and flow-based asset purchase programs, policies targeting interest rate levels rather than the quantity of asset purchases, and programs aimed at increasing more direct lending to households and firms. For each of these BSP options, we evaluate benefits and costs. We conclude by observing that BSPs’ relative effectiveness and thus optimal configuration will ...