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.
|Date of creation:||01 Jan 2005|
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- Aizenman, Joshua & Marion, Nancy, 2003.
"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.
- Robert P Flood & Nancy P. Marion, 2002. "Holding International Reserves in an Era of High Capital Mobility," IMF Working Papers 02/62, International Monetary Fund.
- George A Mackenzie & Peter Stella, 1996. "Quasi-Fiscal Operations of Public Financial Institutions," IMF Occasional Papers 142, International Monetary Fund.
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