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  • Print publication year: 2020
  • Online publication date: November 2020

1 - The Central Bank Balance Sheet: Why It Matters


Chapter 1 starts with a brief overview of the facts about the advanced economy central bank balance sheet explosion since the Great Financial Crisis. The increase in profit remittances by the Fed to the US Treasury during the post-GFC years of extraordinarily low policy rates stands out. The Chapter then delves into the analytics of seigniorage arithmetic and how seigniorage revenues can boost fiscal space. Away from the ELB, the real value of the seigniorage (as a share of GDP) that can be extracted at a target rate of inflation of, say, 2 percent is rather small – typically well under 0.5% of GDP for most advanced economies. At the ELB, however, seigniorage can be truly massive.

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