The central bank balance sheet as a policy tool: lessons from the Bank of England’s experience
Published in Bank of England Staff Working Papers, 2024
(with Andrew Bailey, Jonathan Bridges, Josh Jones and Aakash Mankodi)
This paper examines lessons from the previously unconventional monetary policy measures deployed since the Global Financial Crisis and the emerging evidence on policy responses to the Covid-19 pandemic in 2020. The Bank of England’s quantitative easing (QE) response to the Covid-19 shock was both large in scale and rapid in pace. The QE response also occurred against the backdrop of heightened market dysfunction, suggesting a particular form of “state contingency” of QE. The paper considers some potential implications of this state contingency for future central bank balance sheet policies and the operational framework to support them.