IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/9326.html
   My bibliography  Save this paper

The mystique surrounding the central bank’s balance sheet, applied to the European crisis

Author

Listed:
  • Reis, Ricardo

Abstract

In spite of the mystique behind a central bank’s balance sheet, its resource constraint bounds the dividends it can distribute by the present value of seignorage, which is a modest share of GDP. Moreover, the statutes of the Federal Reserve or the ECB make it difficult for it to redistribute resources across regions. In a simple model of sovereign default, where multiple equilibria arise if debt repudiation lowers fiscal surpluses, the central bank may help to select one equilibrium. The central bank’s main lever over fundamentals is to raise inflation, but otherwise the balance sheet gives it little leeway.

Suggested Citation

  • Reis, Ricardo, 2013. "The mystique surrounding the central bank’s balance sheet, applied to the European crisis," CEPR Discussion Papers 9326, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9326
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9326
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, vol. 88(3), pages 587-597, June.
    2. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
    3. Calvo, Guillermo A, 1988. "Servicing the Public Debt: The Role of Expectations," American Economic Review, American Economic Association, vol. 78(4), pages 647-661, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ricardo Reis LSE, 2016. "Comment," NBER Macroeconomics Annual, University of Chicago Press, vol. 30(1), pages 245-256.
    2. Cavallo, Michele & Del Negro, Marco & Frame, W. Scott & Grasing, Jamie & Malin, Benjamin A. & Rosa, Carlo, 2018. "Fiscal Implications of the Federal Reserve's Balance Sheet Normalization," FRB Atlanta Working Paper 2018-7, Federal Reserve Bank of Atlanta.
    3. Ricardo Reis, 2013. "Central Bank Design," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 17-44, Fall.
    4. Del Negro, Marco & Sims, Christopher A., 2015. "When does a central bank׳s balance sheet require fiscal support?," Journal of Monetary Economics, Elsevier, vol. 73(C), pages 1-19.
    5. M. Kasongo Kashama, 2016. "Helicopter money and debt-financed fiscal stimulus : one and the same thing ?," Economic Review, National Bank of Belgium, issue iii, pages 31-40, December.
    6. Galo Nuño & Carlos Thomas, 2015. "Monetary policy and sovereign debt vulnerability," Working Papers 1517, Banco de España;Working Papers Homepage.
    7. Ricardo Reis, 2013. "The Portugese Slump and Crash and the Euro Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 143-210.
    8. Ricardo Reis, 2015. "Comment on "External and Public Debt Crises"," NBER Chapters,in: NBER Macroeconomics Annual 2015, Volume 30, pages 245-256 National Bureau of Economic Research, Inc.
    9. repec:pal:imfecr:v:65:y:2017:i:4:d:10.1057_s41308-016-0027-8 is not listed on IDEAS
    10. Christophe Blot & Jérôme Creel & Paul Hubert, 2016. "Rooms for extension of the ECB’s quantitative easing programme," Sciences Po publications info:hdl:2441/6tr1nod75s8, Sciences Po.
    11. David Greenlaw & James D. Hamilton & Peter Hooper & Frederic S. Mishkin, 2013. "Crunch Time: Fiscal Crises and the Role of Monetary Policy," NBER Working Papers 19297, National Bureau of Economic Research, Inc.
    12. repec:eee:macchp:v2-2305 is not listed on IDEAS
    13. Andreas Tischbirek, 2016. "Unconventional Monetary Policy in a Currency Union with Segmentation in the Market for Government Debt," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 16.16, Université de Lausanne, Faculté des HEC, DEEP.
    14. Garreth Rule, 2015. "Understanding the central bank balance sheet," Handbooks, Centre for Central Banking Studies, Bank of England, edition 1, number 32, March.
    15. Atsushi Tanaka, 2018. "Monetary Base Controllability after an Exit from Quantitative Easing," Discussion Paper Series 181, School of Economics, Kwansei Gakuin University, revised Jul 2018.
    16. Brigitte Granville & Dominik Nagly, 2015. "Conflicting Incentives for Public Support for EMU," Manchester School, University of Manchester, vol. 83, pages 142-157, December.
    17. Martin, Alberto, 2016. "Comments on “Reverse speculative attacks” by M. Amador, J. Bianchi, L. Bocola and F. Perri," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 138-140.
    18. Benigno, Pierpaolo & Nisticò, Salvatore, 2015. "Non-Neutrality of Open-Market Operations," CEPR Discussion Papers 10594, C.E.P.R. Discussion Papers.
    19. Luis Catão & Ana Fostel & Romain Ranciere, 2017. "Fiscal Discoveries and Yield Decouplings," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 65(4), pages 704-744, November.
    20. Ricardo Reis, 2015. "Different Types of Central Bank Insolvency and the Central Role of Seignorage," NBER Working Papers 21226, National Bureau of Economic Research, Inc.
    21. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69, January.
    22. repec:eee:inecon:v:110:y:2018:i:c:p:119-134 is not listed on IDEAS
    23. Alberto Martin, 2016. "Reverse speculative attacks: A comment," Economics Working Papers 1522, Department of Economics and Business, Universitat Pompeu Fabra.
    24. van Holle, Frederiek, 2017. "Essays in empirical finance and monetary policy," Other publications TiSEM 30d11a4b-7bc9-4c81-ad24-5, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    central bank capital; Eurosystem; seignorage; sovereign debt crisis;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:9326. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.