Using a simple general equilibrium model, we argue that it would be appropriate for a central bank with a large balance sheet composed of long-duration nominal assets to have access to, and be willing to ask for, support for its balance sheet by the fiscal authority. Otherwise its ability to...

Since the fall of 2008, the amount of outstanding reserves on the Federal Reserve's balance sheet has increased from about 100 billion dollars to more than 1 trillion dollars. There is some concern that the magnitude of outstanding reserves might affect the ability of the Federal Reserve to...