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Why Do Central Banks Go Weak?

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  • Nada Oulidi
  • Alain Ize

Abstract

Determinants of central banks' profitability are studied using a statistical analysis of their balance sheets, country characteristics, and the macroeconomic and institutional environments in which they operate. Central banks at both tails of the distribution of profits generally operate in poorer countries with more troubled macroeconomic and institutional environments. For these central banks, profitability is strongly influenced by fiscal dominance and, to a lesser extent, by how actively central banks used their balance sheet for monetary policy purposes.

Suggested Citation

  • Nada Oulidi & Alain Ize, 2009. "Why Do Central Banks Go Weak?," IMF Working Papers 09/13, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/13
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=22558
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    References listed on IDEAS

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    1. Alain Ize, 2005. "Capitalizing Central Banks: A Net Worth Approach," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 289-310, September.
    2. Claudia H Dziobek & John W. Dalton, 2005. "Central Bank Losses and Experiences in Selected Countries," IMF Working Papers 05/72, International Monetary Fund.
    3. Alain Ize, 2007. "Spending Seigniorage: Do Central Banks Have a Governance Problem?," IMF Staff Papers, Palgrave Macmillan, vol. 54(3), pages 563-589, July.
    4. Peter Stella, 2005. "Central Bank Financial Strength, Transparency, and Policy Credibility," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 335-365, September.
    5. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
    6. Peter Stella & Ulrich H Klueh, 2008. "Central Bank Financial Strength and Policy Performance; An Econometric Evaluation," IMF Working Papers 08/176, International Monetary Fund.
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    Cited by:

    1. Erdin MALOKU, 2011. "Role of Central Bank in the Establishment and the Development of Financial System in Post-War Kosovo," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(5), pages 1-14, August.
    2. Tatom, John A., 2014. "U.S. monetary policy in disarray," Journal of Financial Stability, Elsevier, vol. 12(C), pages 47-58.
    3. repec:bla:reviec:v:25:y:2017:i:5:p:990-998 is not listed on IDEAS
    4. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beitr├Ąge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69, November.

    More about this item

    Keywords

    Economic models; Fiscal analysis; Fiscal management; Fiscal dominance; Bank soundness; Central banking; Central banks; Cross country analysis; Profits; central bank strength; central bank; banking; financial strength;

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