Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/298996 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Central Banking Theory and Practice [ISSN:] 2336-9205 [Volume:] 9 [Issue:] 3 [Year:] 2020 [Pages:] 122-134
Publisher: 
Sciendo, Warsaw
Abstract: 
This study examines the problem that a central bank may face after exiting a monetary quantitative easing policy. It develops a simple dynamic optimization model of a central bank, which finds that if the bank needs to absorb a substantial amount of excess reserves when exiting, the monetary base may become uncontrollable. In this case, the bank has no option but to increase the monetary base by more than the target amount, which leads to an undesirable money supply expansion and, ultimately, to inflation pressures. The model shows the condition when a central bank faces such a challenging situation.
Subjects: 
central bank
monetary base
quantitative easing
exit strategy
solvency
JEL: 
E52
E58
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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