Substitutability between Balance Sheet Reductions and Policy Rate Hikes: Some Illustrations and a Discussion
Posted: 7 Jun 2022
Date Written: June, 2022
Abstract
This note explores the substitutability between policy rate hikes and reductions in the size of the Federal Reserve's balance sheet for the removal of policy accommodation. We do so using a version of the FRB/US model augmented to incorporate the effects of changes in the Federal Reserve's asset holdings on term premiums.
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Edmund Crawley (Contact Author)
Board of Governors of the Federal Reserve System ( email )
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Etienne Gagnon
Board of Governors of the Federal Reserve System ( email )
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2024523522 (Phone)
James Hebden
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
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James Trevino
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States