Pierpaolo Benigno, Salvatore Nisticò, 15 June 2015

In the aftermath of the Global Crisis, many central banks have engaged in unconventional purchases of risky securities. Such operations can entail possible losses on their balance sheets. This column argues that neutrality of open-market operations holds only in specific policy regimes, such as when central banks’ losses are covered by taxes levied on the public sector. In absence of such support, losses should be resolved through a prolonged increase in inflation.

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