Quasi-Fiscal Implications of Central Bank Crisis Interventions

Abstract

We develop a stylized balance sheet framework to help identify ‘quasi-fiscal’ components of central bank crisis interventions and show how sources of fiscal risk are created from both the new claims and how they are funded. Combining central bank balance sheet data with survey evidence from intervention announcements, we document the risks to the public sector balance sheet from central banks’ interventions in response to the Covid-19 crisis, including non-conventional lending to the financial and non-financial sectors and large-scale purchases of government securities. Case study analysis indicates that management of fiscal risks from central bank crisis interventions varies greatly across countries, although several good practices can be identified.

Keywords: Central bank, quasi-fiscal, fiscal risks, monetary policy, fiscal policy, sovereign debt management, policy coordination

JEL Classification: E02, E58, E60, E63, E69, H12, H63