The Mystique Surrounding the Central Bank's Balance Sheet, Applied to the European Crisis

I am grateful to the euro-nomics group for motivating this work, to Robert Hall for many insightful discussions, to Markus Brunnermeier, Anil Kashyap, and Mike Woodford for comments, and to a grant from the Institute for New Economic Thinking for funding. Disclosure of outside compensated activities is available at http://www.columbia.edu/~rr2572/disclosure.htm. This is an expanded version of the paper with the same title appearing in the American Economic Review Papers and Proceedings, in May of 2013. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.