Macro seminar
Time : 12h15 – 13h30
Date : 27 Mai 2023

Salle 3001

Ivan SHCHAPOV (Ecole Polytechnique-CREST) “Monetary Tightening, Quantitative Easing, and Financial Stability”

Abstract: This paper analyses central bank balance sheet policies in a framework with banks facing occasionally-binding leverage constraints and endogenous disruptions in financial intermediation. Whilst central bank balance sheet expansions are effective in stabilising the economy conditional on a financial stress episode, they increase the likelihood of such episodes and their duration. Balance sheet expansions induce financial intermediaries to take on more risk and slow their recapitalisation over a stress episode. In a tightening cycle, stabilisation properties of balance sheet policies are maintained but come at a significant cost to price stability.

Jean-Baptiste MICHAU (CREST)