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Central Bank Credit to the Government

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Author Info

  • Marcela Matamoros-Indorf
  • Mrinalini Sharma
  • Simon Baker Townsend
  • Luis Ignacio Jácome

Abstract

Using a central bank legislation database, this paper documents and analyzes worldwide institutional arrangements for central bank lending to the government and identifies international practices. Key findings are: (i) in most advanced countries, central banks do not finance government expenditure; (ii) in a large number of emerging and developing countries, short-term financing is allowed in order to smooth out tax revenue fluctuations; (iii) in most countries, the terms and conditions of these loans are typically established by law, such that the amount is capped at a small proportion of annual government revenues, loans are priced at market interest rates, and their maturity falls within the same fiscal year; and (iv) in the vast majority of countries, financing other areas of the state, such as provincial governments and public enterprises, is not allowed. The paper does not address central banks'' financial support during financial crises.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/16.

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Length: 44
Date of creation: 01 Jan 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/16

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Related research

Keywords: Central bank legislation; Bank credit; Developed countries; Developing countries; Emerging markets; central bank; central banks; inflation; government securities; monetary policy; private credit; national bank; monetary fund; public debt; monetary union; reserve bank; liquidity management; currency boards; current account; public finances; monetary expansion; open market operations; issuance of government securities; money supply; reserve banks; domestic debt; debt services; government debt; currency board; monetary control; monetary economics; open ? market operations; treasury bonds; foreign debt; short-term government securities; monetary policy implementation; money market; private financial institutions; balance of payments; monetary program; debt service; monetary transactions; debt obligations; balance of payment; monetary policy operations; balance of payment crisis; government deficits; external debt;

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  1. Cukierman, A. & Miller, G.P. & Neyapti, B., 2000. "Central Bank Rerform, Liberalization and Inflation in Transition Economies - an International Perspective," Papers, Tel Aviv 2000-19, Tel Aviv.
  2. Cukierman Alex, 1992. "Central Bank Strategy, Credibility, And Independance: Theory And Evidence," Journal des Economistes et des Etudes Humaines, De Gruyter, De Gruyter, vol. 3(4), pages 10, December.
  3. Marco Arnone & Bernard J Laurens & Jean-Fran�ois Segalotto & Martin Sommer, 2009. "Central Bank Autonomy: Lessons from Global Trends," IMF Staff Papers, Palgrave Macmillan, vol. 56(2), pages 263-296, June.
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