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.
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NBER Working Papers
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"Large Hoardings of International Reserves: Are They Worth It?,"
Central Banking, Analysis, and Economic Policies Book Series,
in: Ricardo Caballero & César Calderón & Luis Felipe Céspedes & Norman Loayza (Series Editor) & Klaus Sc (ed.), External Vulnerability and Preventive Policies, edition 1, volume 10, chapter 6, pages 171-206
Central Bank of Chile.
- Pablo García & Claudio Soto, 2004. "Large Hoardings of International Reserves: Are They Worth It?," Working Papers Central Bank of Chile 299, Central Bank of Chile.
- J.Ramon Martinez-Resano, 2004. "Central bank Financial Independence," Macroeconomics 0403011, EconWPA.
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