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Discussion Paper

Substitutability between Balance Sheet Reductions and Policy Rate Hikes: Some Illustrations and a Discussion


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.

https://doi.org/10.17016/2380-7172.3147

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: FEDS Notes

Publication Date: 2022-06-03

Number: 2022-06-03-2