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Spending Seigniorage: Do Central Banks Have a Governance Problem?

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  • Alain Ize

Abstract

This paper reviews how central banks allocate seigniorage, based on systematic cross-country comparisons of their financial accounts. Central banks are classified as weak or strong, depending on their structural profitability. Weak central banks typically (although not exclusively) operate in smaller and less wealthy countries, lack independence from their governments, and are burdened by large nonperforming assets, compulsory transfers, and low capital. Notwithstanding their weak finances, these central banks tend to overspend with regard to their operating expenditures. Governance also appears to be a potential concern in many strong central banks, however, with operating expenditures often adjusting upward for high profitability and capital accumulation and downward for low profitability. Main policy implications are briefly reviewed. IMF Staff Papers (2007) 54, 563–589. doi:10.1057/palgrave.imfsp.9450017

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  • Alain Ize, 2007. "Spending Seigniorage: Do Central Banks Have a Governance Problem?," IMF Staff Papers, Palgrave Macmillan, vol. 54(3), pages 563-589, July.
  • Handle: RePEc:pal:imfstp:v:54:y:2007:i:3:p:563-589
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    1. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-793, May.
    2. Alain Ize, 2005. "Capitalizing Central Banks: A Net Worth Approach," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 289-310, September.
    3. Peter Stella, 1997. "Do Central Banks Need Capital?," IMF Working Papers 97/83, International Monetary Fund.
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    Cited by:

    1. Sweidan, Osama D., 2011. "Inflation variability between central bank's preferences and the structure of the economy: A note," Economic Modelling, Elsevier, vol. 28(1), pages 630-636.
    2. Åke Lönnberg & Peter Stella, 2008. "Issues in Central Bank Finance and Independence," IMF Working Papers 08/37, International Monetary Fund.
    3. Jorge E. Restrepo L. & Luis Salomó S. & Rodrigo O. Valdés P., 2009. "Macroeconomy, Monetary Policy and Central Bank Capitalization," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 12(1), pages 5-38, April.
    4. repec:bla:reviec:v:25:y:2017:i:5:p:990-998 is not listed on IDEAS
    5. Hampl, Mojmir & Havranek, Tomas, 2018. "Central Bank Capital as an Instrument of Monetary Policy," EconStor Preprints 176828, ZBW - Leibniz Information Centre for Economics.
    6. Berger, Helge & Nitsch, Volker & Lybek, Tonny, 2008. "Central bank boards around the world: Why does membership size differ?," European Journal of Political Economy, Elsevier, vol. 24(4), pages 817-832, December.
    7. Peter Stella & Ulrich H Klueh, 2008. "Central Bank Financial Strength and Policy Performance; An Econometric Evaluation," IMF Working Papers 08/176, International Monetary Fund.
    8. Vergote, Olivier & Studener, Werner & Efthymiadis, Ioannis & Merriman, Niall, 2010. "Main drivers of the ECB financial accounts and ECB financial strength over the first 11 years," Occasional Paper Series 111, European Central Bank.
    9. Mojmir Hampl & Tomas Havranek, 2018. "Central Bank Financial Strength and Inflation: A Meta-Analysis," Research and Policy Notes 2018/01, Czech National Bank.
    10. Qichun He & Heng-fu Zou, 2018. "Central Bank Independence and Inflation: Schumpeterian Theory and Evidence," CEMA Working Papers 606, China Economics and Management Academy, Central University of Finance and Economics.
    11. Schwarz Claudia & Karakitsos Polychronis & Merriman Niall & Studener Werner, 2015. "Why Accounting Matters: A Central Bank Perspective," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 5(1), pages 1-42, March.
    12. Nada Oulidi & Alain Ize, 2009. "Why Do Central Banks Go Weak?," IMF Working Papers 09/13, International Monetary Fund.
    13. Perera, Anil & Ralston, Deborah & Wickramanayake, Jayasinghe, 2013. "Central bank financial strength and inflation: Is there a robust link?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 399-414.
    14. Peter Stella & Åke Lonnberg, 2008. "Issues in central bank finance and independence," FRB Atlanta Working Paper 2008-13, Federal Reserve Bank of Atlanta.

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