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Staff, Functions, and Staff Costs at Central Banks: An International Comparison with a Labor-demand Model

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  • Jorge Galán Camacho

    ()

  • Miguel Sarmiento Paipilla

    ()

Abstract

During the period 2000-2004 central banks sustained a generalized reduction in their staff, which was accompanied, in most cases, with significant increases in staff costs. This could obey to an enhanced interest of central banks in focusing on their core functions. In fact, central banks have changed the ways they perform their operative functions (e.g. currency operations, payment systems operation, printing notes, etc.) through different strategies aimed at gathering the participation of third parties. These strategies differ according to the relationship that central banks have with the financial sector and the government, as well as to their historical tradition and modernization trend. To explain the effect of these changes on the staff, we estimated a short-term labor demand function for 66 central banks using a panel data model with random effects. Results indicate that central banks’ labor demand is strongly determined by the country’s population, economic development level and changes in operative functions, as well as by staff costs. In addition, we found a low employment-wage elasticity suggesting the presence of a flexible budgetary constrain in central banks.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 419.

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Handle: RePEc:bdr:borrec:419

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Keywords: Central Banking; Labor Demand; Modernization; Functions; Staff Costs; Panel Data; Random Effects. Classification JEL: E50; J23; J30; C33;

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  1. Di Noia, Carmine & Di Giorgio, Giorgio, 1999. "Should Banking Supervision and Monetary Policy Tasks Be Given to Different Agencies?," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 2(3), pages 361-78, November.
  2. Hsiao,Cheng, 2003. "Analysis of Panel Data," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521818551.
  3. Nout Wellink & Bryan Chapple & Philipp Maier, 2002. "The role of national central banks within the European System of Central Banks: The example of De Nederlandsche Bank," Macroeconomics, EconWPA 0207006, EconWPA.
  4. Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999. "Is Bank Supervision Central To Central Banking?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(2), pages 629-653, May.
  5. James Bohn & Diana Hancock & Paul Bauer, 2001. "Estimates of scale and cost efficiency for Federal Reserve currency operations," Economic Review, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-26.
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Cited by:
  1. Jorge Eduardo Galán Camacho & Miguel Sarmiento Paipilla, 2007. "Banknote Printing At Modern Central Banking:Trends, Costs, And Efficiency," BORRADORES DE ECONOMIA 004393, BANCO DE LA REPÚBLICA.

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