Capitalizing Central Banks: A Net Worth Approach
This paper provides a simple, quantitative, net-worth-based approach to assessing the need for central bank capital. It derives a concept of "core capital" (a function of the central bank's operating expenditures and the carrying cost of its international reserves) as the minimum capital needed by a central bank to ensure the credibility of its inflation target. The approach is illustrated with the published accounts of three loss-making central banks and selected accounting entries for a broader sample of central banks. Policy implications are explored. In particular, the paper argues that central bank capitalizations cannot be automatic and require instead a broad policy debate.
Volume (Year): 52 (2005)
Issue (Month): 2 (September)
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"The high demand for international reserves in the Far East: What is going on?,"
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- J.Ramon Martinez-Resano, 2004. "Central bank Financial Independence," Macroeconomics 0403011, EconWPA. Full references (including those not matched with items on IDEAS)
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