When Does a Central Bank ’ s Balance Sheet Require Fiscal Support ?

@inproceedings{Negro2014WhenDA,
  title={When Does a Central Bank ’ s Balance Sheet Require Fiscal Support ?},
  author={Marco Negro and Christopher A. Sims and BSTRACT},
  year={2014}
}
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… CONTINUE READING

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