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Central Bank Balance Sheet Policies and Inflation Expectations

Author

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  • Jan Willem End

    (De Nederlandsche Bank)

  • Christiaan Pattipeilohy

    (De Nederlandsche Bank)

Abstract

We analyse the empirical effects of credit easing and quantitative easing on inflation expectations and exchange rates. Both monetary policy strategies are summarised in measures for composition and size of the central bank balance sheet and are included in a VAR model. The results show that changes in balance sheet size had positive, albeit weak effects on inflation expectations in Japan, while the effects were negligible in the euro area. By contrast, an increasing balance sheet size is associated with reduced short-term inflation expectations in the US and UK, pointing at negative signalling effects. Shocks to balance sheet size or composition have no substantial effects on long-term inflation expectations in the euro area, US and UK. An expanding balance sheet size is associated with a depreciation of the euro, pound sterling and Japanese yen.

Suggested Citation

  • Jan Willem End & Christiaan Pattipeilohy, 2017. "Central Bank Balance Sheet Policies and Inflation Expectations," Open Economies Review, Springer, vol. 28(3), pages 499-522, July.
    • Handle: RePEc:kap:openec:v:28:y:2017:i:3:d:10.1007_s11079-016-9426-8
    DOI: 10.1007/s11079-016-9426-8
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    References listed on IDEAS

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    Cited by:

    1. Rémi Odry & Roman Mestre, 2021. "Monetary Policy and Business Cycle Synchronization in Europe," EconomiX Working Papers 2021-19, University of Paris Nanterre, EconomiX.
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    3. Aßhoff, Sina & Belke, Ansgar & Osowski, Thomas, 2021. "Unconventional monetary policy and inflation expectations in the Euro area," Economic Modelling, Elsevier, vol. 102(C).
    4. Bank for International Settlements, 2019. "Unconventional monetary policy tools: a cross-country analysis," CGFS Papers, Bank for International Settlements, number 63, december.

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    More about this item

    Keywords

    Central banks and their policies; Monetary policy;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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