Central Bank Financial Strength, Policy Constraints and Inflation
Central Bank Financial Strength, Policy Constraints and Inflation

Author: Peter Stella

Publisher: International Monetary Fund

Published: 2008-02

Total Pages: 32

ISBN-13:

DOWNLOAD EBOOK

Central bank financial strength is positively associated with good policy performance. Financially weak central banks generate losses which undermine macroeconomic stability and call into question the credibility of their policies. In assessing central bank financial strength a careful examination of the policy regime and the volatility of the economic environment is necessary. Conventional measures of private enterprise financial strength- profitability and capital-can be very misleading when applied to central banks. The way in which a central bank balance sheet is strengthened matters. Providing the central bank with marketable government debt that can be used to develop a money market that in turn may become the locus of central bank monetary operations serves both to directly strengthen the institution and improve the quality of the environment in which it operates, thereby facilitating the attainment of its ultimate performance objectives.

Central Banks Quasi-Fiscal Policies and Inflation
Central Banks Quasi-Fiscal Policies and Inflation

Author: Mr.Seok Gil Park

Publisher: International Monetary Fund

Published: 2012-01-01

Total Pages: 35

ISBN-13: 1463931190

DOWNLOAD EBOOK

Although central banks have recently taken unconventional policy actions to try to shore up macroeconomic and financial stability, little theory is available to assess the consequences of such measures. This paper offers a theoretical model with which such policies can be analyzed. In particular, the paper shows that in the absence of the fiscal authorities' full backing of the central bank's balance sheet, strange things can happen. For instance, an exit from quantitative easing could be inflationary and central banks cannot successfully unwind inflated balance sheets. Therefore, the fiscal authorities' full backing of the monetary authorities' quasi-fiscal operations is a pre-condition for effective monetary policy.

Central Bank Financial Strength, Transparency, and Policy Credibility
Central Bank Financial Strength, Transparency, and Policy Credibility

Author: Peter Stella

Publisher: International Monetary Fund

Published: 2002-08

Total Pages: 48

ISBN-13:

DOWNLOAD EBOOK

A central bank is financially strong if it possesses resources sufficient to attain its fundamental policy objective(s). Once endowed with those resources, relations between government and central bank should be designed so that significant changes in central bank financial strength do not occur unless necessitated by changes in policy objectives. The level of strength required depends on the array of policy objectives (for example, the exchange rate regime) as well as the constraints and risks presented by the operational environment. Attaining credibility is facilitated if the public can easily determine the financial strength of the bank, yet for a variety of reasons this is often difficult. Transparency requires institutional arrangements that ensure the central bank generates profit in most states of the world, is subject to strict ex post independent audit, and transfers regularly all profits, after provisions, to the treasury.

Central Bank Financial Strength and Policy Performance: An Econometric Evaluation
Central Bank Financial Strength and Policy Performance: An Econometric Evaluation

Author: Ulrich H. Klueh

Publisher: INTERNATIONAL MONETARY FUND

Published: 2008-07-01

Total Pages: 45

ISBN-13: 9781451870343

DOWNLOAD EBOOK

The financial health of central banks and its relation to policy outcomes has recently been recognized as an important policy issue. While case study evidence clearly indicates that weak central bank finances can hamper effective policy implementation, the question of whether central bank financial strength influences policy performance remains controversial. This is due, in part, to a lack of econometric evidence. The paper presents a first step toward filling this gap, by providing a quantitative evaluation of the relationship between measures of central bank financial strength and policy performance, in particular inflation. The paper's major finding is that there indeed is a negative relationship between central bank financial strength and inflation outcomes. This relationship appears to be robust to the choice of alternative country samples, control variables, estimation strategies, and conceptualizations of central bank financial strength.

Inflation Targeting and Financial Stability
Inflation Targeting and Financial Stability

Author: Michael Heise

Publisher: Springer

Published: 2019-02-26

Total Pages: 111

ISBN-13: 3030050785

DOWNLOAD EBOOK

Since the financial crisis of 2008/09, the world’s major central banks have been struggling to return their economies to higher growth and to reach their inflation targets. This concise book analyzes the importance of central bank policies for the economy, and specifically investigates the reasons why they have failed to steer inflation as desired. The author, the Chief Economist at Allianz SE, argues that, in an environment of great uncertainty concerning the pass-through of monetary stimulus to the economy, central banks should not focus too narrowly on inflation targets, but should increasingly take the side effects of their actions into account. In particular, he contends that they must seek to minimize the risk of financial booms and busts in order to maximize long-term growth and prosperity. Building on existing research and contributing to the current debate, the book offers a valuable reference guide and food for thought for policymakers, professionals and students alike.

Should Unconventional Balance Sheet Policies Be Added to the Central Bank toolkit? a Review of the Experience so Far
Should Unconventional Balance Sheet Policies Be Added to the Central Bank toolkit? a Review of the Experience so Far

Author: Mr.Mark R. Stone

Publisher: International Monetary Fund

Published: 2011-06-01

Total Pages: 72

ISBN-13: 1455268461

DOWNLOAD EBOOK

What is the case for adding the unconventional balance sheet policies used by major central banks since 2007 to the standard policy toolkit? The record so far suggests that the new liquidity providing policies in support of financial stability generally warrant inclusion. As the balance sheet policies aimed at macroeconomic stability were used only by a small number of highly credible central banks facing a lower bound constraint on conventional interest rate policy, they are not relevant for most central banks or states of the world. Best practices of these policies are documented in this paper.

Inflation Expectations
Inflation Expectations

Author: Peter J. N. Sinclair

Publisher: Routledge

Published: 2009-12-16

Total Pages: 402

ISBN-13: 1135179778

DOWNLOAD EBOOK

Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.