Central Bank Losses and Economic Convergence
AbstractThis paper discusses the issue of central bank losses, developing a framework for assessing the ability of a central bank to keep its balance sheet sustainable without having to default on its policy objectives. Compared to the earlier literature, it analyses in more depth the consequences of economic convergence for the evolution of the central bankâ€™s balance sheet and the important role played in this process by the risk premium and equilibrium real exchange rate appreciation. A combination of a closed-form comparative-static analysis and numerical solutions of the future evolution of the central bankâ€™s own capital is used. Applying the framework to the Czech National Bankâ€™s case, the paper concludes that the CNB should be able to repay its accumulated loss in about 15 years without any transfer from public budgets.
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Bibliographic InfoPaper provided by Czech National Bank, Research Department in its series Working Papers with number 2008/3.
Date of creation: Oct 2008
Date of revision:
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Balance sheet; central bank; economic convergence; monetary policy; real appreciation; risk premium; seigniorage; transition.;
Other versions of this item:
- Martin Cincibuch & Tomáš Holub & Jaromír Hurník, 2009. "Central Bank Losses and Economic Convergence," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(3), pages 190-215, August.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-07 (All new papers)
- NEP-CBA-2008-12-07 (Central Banking)
- NEP-MAC-2008-12-07 (Macroeconomics)
- NEP-MON-2008-12-07 (Monetary Economics)
- NEP-TRA-2008-12-07 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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