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Quantitative Easing and the Independence of the Bank of England

Published online by Cambridge University Press:  01 January 2020

William A. Allen
William A. Allen*
Affiliation:
National Institute of Economic and Social Research
*
E-mail: [email protected]
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Abstract

This paper argues that the Bank of England's independence in monetary policy has been compromised as a result of quantitative easing (QE) and makes practical suggestions for restoring it as far as possible, by transferring the gilts that the Bank has bought to the Debt Management Office of the Treasury and thereby shrinking the Bank's balance sheet. The paper discusses the problems that will arise when QE is unwound and suggests that they would be less intractable if the unwinding were managed by the Debt Management Office.

Keywords

central bank independencequantitative easingBank of Englanddebt managementmarket liquidityE52E58E63
Type
Notes and Contributions
Information
National Institute Economic Review , Volume 241 , August 2017 , pp. R65 - R69
Copyright
Copyright © 2017 National Institute of Economic and Social Research

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Footnotes

I am grateful to Richhild Moessner and Tim Young for useful discussions on this subject and comments on earlier versions of the paper. Neither of them is responsible for defects in the published version.

References

Balls, E., Howat, J. and Stansbury, A. (2016), ‘Central bank independence revisited: after the financial crisis, what should a model central bank look like?’, Harvard-Kennedy School M-RCBG Associate Working Paper no 67.Google Scholar
Bank of England (2016), Annual Report.Google Scholar
Breedon, F. and Turner, P. (2016), ‘On the transactions costs of quantitative easing’, BIS Working Paper no 571, July.Google Scholar