The Impact of the Fed’s Balance Sheet Shrinking From the Perspective of Excess Reserve
Abstract: In September 2017, the FOMC announced that it would formally start to shrink fed’s balance sheet. Since then, the Fed’s balance sheet has been the focus of market attention. Excess reserve is one of its important components. Since the 2008 financial crisis, the huge amount of excess reserve has made it the largest item on the Fed’s balance sheet. The Fed brings forward the timing to pay interest on excess reserve and promotes the transformation of monetary policy. From the perspective of the excess reserve, we analyze the impact of the Fed's balance sheet shrinking to bring new inspiration.