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Fiscal Aspects of Central Bank Independence

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  • Christopher A. Sims

Abstract

Most macroeconomic models treat the central bank and the trea-sury as a unified entity. The balance sheet of the central bank is therefore implicitly treated as an accounting fiction. While this is often realistic, the central bank balance sheet has implications for central bank independence. There are wide differences in the nature of central bank balance sheets today, with the US and ESCB balance sheets nearly at the extremes. The reasons for and implications of these differences are studied here.

Suggested Citation

  • Christopher A. Sims, 2001. "Fiscal Aspects of Central Bank Independence," CESifo Working Paper Series 547, CESifo.
    • Handle: RePEc:ces:ceswps:_547
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    References listed on IDEAS

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    1. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
    2. Yum K. Kwan & Francis Lui, 1999. "Hong Kong's Currency Board and Changing Monetary Regimes," NBER Chapters, in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, pages 403-436, National Bureau of Economic Research, Inc.
    3. Stephanie Schmitt-Grohe & Jess Benhabib & Martin Uribe, 2001. "Monetary Policy and Multiple Equilibria," American Economic Review, American Economic Association, vol. 91(1), pages 167-186, March.
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    2. Buiter, Willem, 2006. "How Robust is the New Conventional Wisdom? The Surprising Fragility of the Theoretical Foundations of Inflation Targeting and C," CEPR Discussion Papers 5772, C.E.P.R. Discussion Papers.
    3. Kris James Mitchener & Eric Monnet, 2023. "Connected Lending of Last Resort," NBER Working Papers 30869, National Bureau of Economic Research, Inc.
    4. Buiter, Willem H., 2007. "Seigniorage," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 1, pages 1-49.
    5. Olivier Jeanne & Lars E. O. Svensson, 2007. "Credible Commitment to Optimal Escape from a Liquidity Trap: The Role of the Balance Sheet of an Independent Central Bank," American Economic Review, American Economic Association, vol. 97(1), pages 474-490, March.
    6. Scandizzo, Pasquale & Pagliacci, Carolina, 2010. "Foreign Reserve Management in an Oil Economy: Macroeconomic Risk as a Real Option," MPRA Paper 106539, University Library of Munich, Germany.
    7. 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.
    8. Willem H. Buiter, 2003. "Helicopter Money: Irredeemable Fiat Money and the Liquidity Trap," NBER Working Papers 10163, National Bureau of Economic Research, Inc.

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