Quantitative Tightening Around the Globe: What Have We Learned?

Abstract We use recent cross‐country experiences to assess the impact of shrinking central bank balance sheets through quantitative tightening (QT). QT announcements increase government bond yields, steepening the yield curve and potentially signaling a greater commitment to raising policy interest rates, but have more limited effects on most other financial market indicators. Active QT has a larger impact than passive QT, particularly on longer maturities. Increased demand by domestic nonbanks has largely compensated for reduced central bank bond holdings. Overall, QT has (to date) had more of an impact than “paint drying,” but far less than simply reversing the effects of quantitative easing programs.