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Is banking supervision central to central banking?

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Author Info

  • Joe Peek
  • Eric S. Rosengren
  • Geoffrey M.B. Tootell

Abstract

Whether central banks should play an active role in bank supervision and regulation is being debated both in the United States and abroad. While the Bank of England has recently been stripped of its supervisory responsibilities and several proposals in the United States have advocated removing bank supervision from the Federal Reserve System, other countries are considering enhancing central bank involvement in this area. Many of the arguments for and against these proposals hinge on the effect this change would have on the ability of the central bank to conduct monetary policy. We find that confidential supervisory information on bank ratings significantly improves forecast accuracy of variables critical to the conduct of monetary policy, which supports the argument that central banks should have bank supervision responsibility.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 97-3.

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Date of creation: 1997
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Handle: RePEc:fip:fedbwp:97-3

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Keywords: Bank supervision ; Banks and banking; Central;

References

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  1. Jeffrey C. Fuhrer, 1997. "Central bank independence and inflation targeting: monetary policy paradigms for the next millenium?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 19-36.
  2. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-39, May.
  3. Geoffrey M.B. Tootell, 1997. "How farsighted is the FOMC?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 49-65.
  4. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
  5. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
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  8. Christina D. Romer & David H. Romer, 1996. "Federal Reserve Private Information and the Behavior of Interest Rates," NBER Working Papers 5692, National Bureau of Economic Research, Inc.
  9. Joe Peek & Eric S. Rosengren, 1995. "Bank lending and the transmission of monetary policy," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 39, pages 47-79.
  10. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
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  13. Barro, Robert J., 1976. "Rational expectations and the role of monetary policy," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 1-32, January.
  14. Joe Peek & Eric Rosengren, 1993. "Bank regulation and the credit crunch," Working Papers 93-2, Federal Reserve Bank of Boston.
  15. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
  16. Stephen K. McNees, 1986. "Modeling the Fed: a forward- looking monetary policy reaction function," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 3-8.
  17. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  18. Diana Hancock & James A. Wilcox, 1992. "The effect on bank assets of business conditions and capital shortfalls," Proceedings 373, Federal Reserve Bank of Chicago.
  19. Adam Posen, 1995. "Central bank independence and disinflationary credibility: a missing link?," Staff Reports 1, Federal Reserve Bank of New York.
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  21. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
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Cited by:
  1. Tarkka, Juha & Mayes, David, 1999. "The Value of Publishing Official Central Bank Forecasts," Research Discussion Papers 22/1999, Bank of Finland.

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