Quantitative tightening: Protecting monetary policy from fiscal encroachment by William A. Allen, Jagjit Chadha, Philip Turner published by VOXEU (10/2021).
“Since the global financial crisis and the COVID-19 pandemic, monetary, regulatory and fiscal policies have deepened the interconnections between the balance sheets of the central bank, the commercial banks and the government. Quantitative easing (QE), in which central banks buy long-term government bonds (to lower long-term interest rates), has created a rapid escalation in commercial bank reserve balances with the central bank. In addition, liquidity rules introduced after the global financial crisis have required commercial banks to increase their liquid asset holdings, including both reserve balances with the central bank and government securities (see Chadha et al. 2021a)…”
