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Fiscal Implications of Central Bank Balance Sheet Policies

Orphanides, Athanasios, (2016), “Fiscal Implications of Central Bank Balance Sheet Policies”, Centre for Economic Policy Research, July

Under ordinary circumstances, the fiscal implications of central bank policies tend to be seen as relatively minor and escape close scrutiny. The global financial crisis of 2008, however, demanded an extraordinary response by central banks which brought to light the immense power of central bank balance sheet policies as well as their major fiscal implications. Once the zero lower bound on interest rates is reached, expanding a central bank’s balance sheet becomes the central instrument for providing additional monetary policy accommodation.

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