Transmission of Quantitative Easing: The Role of Central Bank Reserves


Signe Krogstrup

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2014-18 | June 1, 2016

We argue that the issuance of central bank reserves per se can matter for the effect of central bank large-scale asset purchases—commonly known as quantitative easing—on long-term interest rates. This effect is independent of the assets purchased, and runs through a reserve-induced portfolio balance channel. For evidence we analyze the reaction of Swiss long-term government bond yields to announcements by the Swiss National Bank to expand central bank reserves without acquiring any long-lived securities. We find that declines in long-term yields following the announcements mainly reflected reduced term premiums suggestive of reserve-induced portfolio balance effects.

Article Citation

Christensen, Jens H. E., and Signe Krogstrup. 2014. “Transmission of Quantitative Easing: The Role of Central Bank Reserves,” Federal Reserve Bank of San Francisco Working Paper 2014-18. Available at

About the Author
Jens Christensen
Jens Christensen is a research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Jens Christensen