Conference Agenda

The US government’s money demand is large and volatile and takes the form of the Treasury General Account (TGA) at the Federal Reserve. I study the drivers of TGA volatility and the options available to the Federal Reserve for adjusting its balance sheet in response to this volatility. Using interest rate control, control of the Fed’s overall policy stance, and communication as criteria, I argue that a policy of adjusting the Fed’s holdings of Treasury bills (or other short-maturity assets) performs better than the current ample reserves policy of letting the supply of reserves and overnight reverse repo facility balances adjust passively to changes in the TGA.

This paper shows that the prolonged period of low long-term interest rates fundamentally reshaped the European financial system by compressing the life-insurance sector—the main private holder of long-dated sovereign debt. Life insurers depend on high long- term yields to offer attractive guaranteed-return savings products to households. Using newly assembled supervisory data from EIOPA combined with flow-of-funds statistics, we show that the compression of term premia under quantitative easing (QE) reduced household inflows into life insurers by nearly EUR2 trillion between 2015 and 2022, leading to a sharp contraction in their bond holdings. Instrumenting the term premium with high-frequency monetary policy shocks, we find that insurers’ inflows respond strongly to long-term rates, particularly among those most exposed to guaranteed-rate products. Because insurers invest roughly EUR0.70 in bonds for every EUR1 of inflows, this liability-side channel accounts for the bulk of their bond demand. The effects during QT were not symmetric: rising rates triggered widespread policy surrenders, turning insurers into net sellers of government bonds. Although inflows have begun to recover as yields normalized, the rebound remains limited. By compressing long-term yields, QE indirectly reshaped the investor base for sovereign debt—leaving bond markets more reliant on central bank demand and less anchored by private long-term investors.

This paper studies the interaction between capital constraints from the Supervisory Capital Assessment Program (SCAP) and the Federal Reserve’s quantitative easing (QE) in shaping banks’ lending behavior. Using comprehensive loan-rate data, we find that SCAP banks lower mortgage rates more—but raise consumer loan rates more—than non-SCAP banks, highlighting a trade-off imposed by balance-sheet constraints. Our theoretical framework suggests that SCAP banks prioritize mortgage lending to take advantage of reduced funding costs associated with QE, which necessitates a reduction in consumer lending and higher consumer loan rates to remain within regulatory capital limits. These findings inform how regulatory constraints can influence the transmission of monetary policy across credit markets.