The Organisation and Structure of Central Banks

This dissertation is concerned with selected issues and tendencies in the organisation of central banks and is based on a new dataset which was compiled from a variety of sources such as central bank annual reports. The dissertation seeks to close gaps in the current literature by assessing some issues of interest empirically, which are discussed in four chapters. Chapter 2 introduces the dataset and gives an overview of different areas in the organisation of central banks where important changes have occurred in recent years. These changes include among others the increased use of explicit inflation targets, the spread of currency unions, and a more active and expansive management of international reserves. The chapter shows that central banks are indeed subject to constant change in many fields. Chapter 3 explores how hierarchies and relations within central banks have evolved over time and seeks to identify possible drivers of change. To this end, more than 1,200 historical organisational charts were analysed. A main finding is that central banks around the world have actively modified their organisational structures during the period 2004-2015. On average, they have increased the number of organisational elements, have become slightly less centralised, and employ fewer people. I show this by constructing different measures of organisational structures. Relating these measures to selected country-specific variables cannot confirm anecdotal evidence pointing to inter alia technological progress and budgetary pressure as important drivers of change. Chapter 4 is concerned with determinants of the currency composition of international reserves held by central banks. This chapter is based on panel data for the period 1996-2015 and 37 central banks. In particular, we identify currency pegs and trade patterns as primary driving forces. Further, we examine a possible break in euro-denominated asset holdings caused by the euro crisis. The euro crisis appears to have been a throwback for the euro (EUR), which temporarily seemed to challenge the US dollar (USD), but had an only partial impact on determinants of international reserve compositions. In a final exercise, we estimate currency compositions of international reserves of the three major non-disclosing countries, id est China, Japan, and Saudi Arabia. Chapter 5 discusses how financial market supervision is organised around the world. It examines over time how supervisory responsibilities for the three main financial protagonists, banks, securities markets, and insurance companies, are distributed. Analysing supervisory structures of 170 states for the period 1999-2015, I show a trend towards more integrated approaches of supervision. Formal statistical analyses further suggest that political factors influence the degree of supervisory consolidation and that supervisory designs are correlated with the general organisation of public activities in a country: Federalism, especially, is associated with lesser integration of supervisory responsibilities, while government effectiveness and democracy is associated with more integration of supervisory responsibilities.