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Working Paper
Passive Quantitative Easing: Bond Supply Effects through a Halt to Debt Issuance
This article presents empirical evidence of a supply-induced transmission channel to long-term interest rates caused by a halt to government debt issuance. This is conceptually equivalent to a central bank-operated asset purchase program, commonly known as quantitative easing (QE). However, as it involves neither asset purchases nor associated creation of central bank reserves, we refer to it as passive QE. We introduce a general classification scheme of central bank balance sheet policies according to which passive QE is likely quite stimulative. For evidence, we analyze the response of ...