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Central Bank Losses and Experiences in Selected Countries

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  • Claudia Helene Dziobek
  • John W. Dalton
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    Abstract

    Under normal circumstances, a central bank should be able to operate at a profit with a core level of earnings derived from seigniorage. Losses have, however, arisen in several central banks from a range of activities including monetary operations under extreme conditions and financial sector restructuring. The paper discusses the impact of losses on central bank operations and lays out the principles and practices for handling central bank losses. It is suggested that losses should be disclosed as a reduction of the central bank''s net worth unless covered by the government. Governments may cover losses through recapitalization of the central bank, and this will create a new central bank asset, usually in the form of government securities held by the central bank. Six case studies illustrate the circumstances under which losses may arise, their coverage, and central banks'' disclosure practices.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/72.

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    Length: 13
    Date of creation: 01 Apr 2005
    Date of revision:
    Handle: RePEc:imf:imfwpa:05/72

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    Related research

    Keywords: Currency issuance; central bank; central banks; monetary fund; national bank; government securities; external borrowing; monetary policy; open market operations; domestic currency; debt problems; international lending; monetary liabilities; private sector debt; independent monetary policy;

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    References

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    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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    1. repec:imf:imfpdp:9802 is not listed on IDEAS
    2. Peter Stella, 1997. "Do Central Banks Need Capital?," IMF Working Papers 97/83, International Monetary Fund.
    3. repec:imf:imfpdp:9314 is not listed on IDEAS
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    Citations

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    Cited by:
    1. Sònia Muñoz, 2007. "Central Bank Quasi-Fiscal Losses and High Inflation in Zimbabwe: A Note," IMF Working Papers 07/98, International Monetary Fund.
    2. Osama Sweidan, 2010. "Central bank inability and Taylor rule in developing countries," International Review of Economics, Springer, vol. 57(4), pages 395-409, December.
    3. repec:ebl:ecbull:v:5:y:2005:i:12:p:1-6 is not listed on IDEAS
    4. Mali Chivakul & Robert C. York, 2006. "Implications of Quasi-Fiscal Activities in Ghana," IMF Working Papers 06/24, International Monetary Fund.
    5. Kenneth Sullivan & Marie-Thérèse Camilleri Gilson & Tonny Lybek, 2007. "Audit Committees in Central Banks," IMF Working Papers 07/73, International Monetary Fund.
    6. Kamal, Mona, 2010. "الإطار النظرى للتنسيق بين السياستين المالية والنقدية
      [The Theoretical Framework for the Coordination of Fiscal and Monetary Polices]
      ," MPRA Paper 26856, University Library of Munich, Germany.
    7. Nada Oulidi & Alain Ize, 2009. "Why Do Central Banks Go Weak?," IMF Working Papers 09/13, International Monetary Fund.
    8. Bank for International Settlements, 2013. "Central bank finances," BIS Papers, Bank for International Settlements, number 71, May.
    9. Luis Felipe Céspedes & Rodrigo Valdés, 2006. "Autonomía de Bancos Centrales: La Experiencia Chilena," Working Papers Central Bank of Chile 358, Central Bank of Chile.
    10. Garreth Rule, 2011. "Issuing central bank securities," Handbooks, Centre for Central Banking Studies, Bank of England, edition 1, number 30.
    11. Luis Felipe Céspedes C. & Rodrigo Valdés P., 2006. "Central Bank Autonomy: The Chilean Experience," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(1), pages 25-47, April.
    12. Peter Stella & Ulrich H. Klueh, 2008. "Central Bank Financial Strength and Policy Performance," IMF Working Papers 08/176, International Monetary Fund.

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