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Is the Bank of Japan's Financial Structure an Obstacle to Policy?

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  • Thomas F. Cargill

    (International Monetary Fund)

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    Abstract

    Central bank capital and accounting measures of capital adequacy potentially constrain central bank policy outcomes. Historical and institutional factors explain why central banks are organized as public corporations; however, capital structure design provides little predictive insight into policy outcomes. In fact, focusing on accounting measures of capital adequacy and similar performance indicators potentially interferes with monetary policy, especially in extraordinary economic circumstances such as deflation. The Bank of Japan, like the Federal Reserve in the 1930s, has overemphasized accounting measures of central bank performance at the cost of nonoptimal policy outcomes.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

    Volume (Year): 52 (2005)
    Issue (Month): 2 (September)
    Pages: 311-334

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    Handle: RePEc:pal:imfstp:v:52:y:2005:i:2:p:311-334

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    Cited by:
    1. Bank for International Settlements, 2013. "Central bank finances," BIS Papers, Bank for International Settlements, Bank for International Settlements, number 71, 8.
    2. Ljungwall, Christer & Xiong, Yi & Zou, Yutong, 2009. "Central Bank Financial Strength And The Cost Of Sterilization In China," Working Paper Series, China Economic Research Center, Stockholm School of Economics 2009-8, China Economic Research Center, Stockholm School of Economics.
    3. Peter Stella & Ulrich H. Klueh, 2008. "Central Bank Financial Strength and Policy Performance," IMF Working Papers, International Monetary Fund 08/176, International Monetary Fund.
    4. Tom Cargill & Federico Guerrero, 2006. "A Reassessment of the Problems with Interest Targeting: What Have We Learned from Japanese Monetary Policy?," Working Papers, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics 06-010, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics.
    5. Tom Cargill & Federico Guerrero, 2006. "A ‘Second-Best’ Rationale to Deflationary Monetary Policy in Japan," Working Papers, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics 06-009, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics.
    6. Perera, Anil & Ralston, Deborah & Wickramanayake, Jayasinghe, 2013. "Central bank financial strength and inflation: Is there a robust link?," Journal of Financial Stability, Elsevier, Elsevier, vol. 9(3), pages 399-414.
    7. Ljungwall, Christer & Xiong, Yi & Yutong, Zou, 2013. "Central bank financial strength and the cost of sterilization in China," China Economic Review, Elsevier, Elsevier, vol. 25(C), pages 105-116.

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