Ballooning Balance Sheets

• Author: Ricardo Davico and Brian John Goldsmith
• Position: Prepared by and of the IMF's Stattics Department.

Data Spotlight

Since the onset of the financial crisis in 2007, there has been a dramatic expansion in the size of the balance sheets of the Bank of England (BOE), the European Central Bank (ECB), and the U.S. Federal Reserve (Fed). Central banks found themselves in a policy quandary. They had difficulty further lowering their policy interest rates to ward off the recession because the rates were already quite low. As a result, these central banks undertook unconventional policies aimed at stabilizing financial markets and fighting the recession by boosting
total demand.

Although each of the central banks had a different approach, all three acted aggressively to inject liquidity into their economies and promote growth. The BOE engaged in a targeted quantitative easing policy that focused mostly on the purchase of government securities. Since March 2009, the BOE’s purchases of government securities (called gilts) have totaled 14 percent of GDP. The ECB
has conducted a range of measures, including long-term financing operations and a limited securities market...