Financial Structures of Central Banks in the Context of Unconventional Measures of Monetary Policy

This paper examines the financial structure of central banks in the context of unconventional monetary policy. It highlights the responses made during the financial crisis of 2007 to 2010. It examines the impact of these exceptional policies in the balance sheets of central banks. These have used various unconventional measures of monetary policy leading to changes and increases of the size of their balance sheets. Pursuing the increase of monetary assets and the control of long-term interest rates, central banks acquired relatively illiquid assets such as long-term government bonds subject to a risk of rate. Quantitative easing policy is able to be effective only if investors believe that monetary authorities will maintain it. But when long rates begin to rise, continuing monetary easing could expose a central bank to a risk of loss in capital on its potential detention of national debts.