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Does Central Bank Capital Matter for Monetary Policy?

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  • Gustavo Adler
  • Pedro Castro
  • Camilo Tovar

Abstract

This paper examines empirically whether central bank capital influences the conduct of monetary policy. To this end, we estimate interest rate rules for a sample of 41 countries and employ linear and non-linear regression methods to test if a measure of central bank financial strength can explain deviations of actual interest rates from those predicted by the estimated interest rate (Taylor-like) rules. Our results suggest that central bank capital is indeed a relevant factor behind interest rate policy decisions. Copyright Springer Science+Business Media New York 2016

Suggested Citation

  • Gustavo Adler & Pedro Castro & Camilo Tovar, 2016. "Does Central Bank Capital Matter for Monetary Policy?," Open Economies Review, Springer, vol. 27(1), pages 183-205, February.
    • Handle: RePEc:kap:openec:v:27:y:2016:i:1:p:183-205
    DOI: 10.1007/s11079-015-9360-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary policy; Central Bank Balance Sheets; Central bank capital; Emerging markets; International reserves; E43; E52; E58;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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

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