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Monetary Policy Normalization and Central Bank Profits: A Break-Even Point Perspective

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  • Polański Zbigniew
  • Szadkowski Mikołaj

    (SGH Warsaw School of Economics, Institute of Political Economy, Law and Economic Policy, Warszawa, Poland)

Abstract

This paper advances a simple framework explaining how monetary policy normalization (“exit policies”) may impact central bank profits. The cases of seven central banks of major and smaller economies serve as an illustration. The notion of the break-even point is applied to study the financial situation of these institutions for the period of 2014–2021. During the normalization process, interest rate increases may adversely affect profit changes, and through transfers may have an impact on the fiscal space available to the governments, creating political economy concerns. Possible remedies are discussed together with accompanying policy dilemmas.

Suggested Citation

  • Polański Zbigniew & Szadkowski Mikołaj, 2022. "Monetary Policy Normalization and Central Bank Profits: A Break-Even Point Perspective," The Economists' Voice, De Gruyter, vol. 19(2), pages 139-164, December.
    • Handle: RePEc:bpj:evoice:v:19:y:2022:i:2:p:139-164:n:5
    DOI: 10.1515/ev-2022-0006
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    More about this item

    Keywords

    central bank profit; break-even point; seigniorage; central bank capital; monetary policy normalization;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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