Central Bank Financial Strength Transparency And Policy Credibility
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Author | : Peter Stella |
Publisher | : |
Total Pages | : 43 |
Release | : 2006 |
Genre | : |
ISBN | : |
A central bank is financially strong if it possesses resources sufficient to attain its fundamental policy objective(s). Once endowed with those resources, relations between government and central bank should be designed so that significant changes in central bank financial strength do not occur unless necessitated by changes in policy objectives. The level of strength required depends on the array of policy objectives (for example, the exchange rate regime) as well as the constraints and risks presented by the operational environment. Attaining credibility is facilitated if the public can easily determine the financial strength of the bank, yet for a variety of reasons this is often difficult. Transparency requires institutional arrangements that ensure the central bank generates profit in most states of the world, is subject to strict ex post independent audit, and transfers regularly all profits, after provisions, to the treasury.
Author | : Peter Stella |
Publisher | : International Monetary Fund |
Total Pages | : 32 |
Release | : 2008-02 |
Genre | : Business & Economics |
ISBN | : |
Central bank financial strength is positively associated with good policy performance. Financially weak central banks generate losses which undermine macroeconomic stability and call into question the credibility of their policies. In assessing central bank financial strength a careful examination of the policy regime and the volatility of the economic environment is necessary. Conventional measures of private enterprise financial strength- profitability and capital-can be very misleading when applied to central banks. The way in which a central bank balance sheet is strengthened matters. Providing the central bank with marketable government debt that can be used to develop a money market that in turn may become the locus of central bank monetary operations serves both to directly strengthen the institution and improve the quality of the environment in which it operates, thereby facilitating the attainment of its ultimate performance objectives.
Author | : Peter Stella |
Publisher | : |
Total Pages | : 42 |
Release | : 2002 |
Genre | : |
ISBN | : |
Author | : Mr.Charles Enoch |
Publisher | : International Monetary Fund |
Total Pages | : 29 |
Release | : 1997-10-01 |
Genre | : Business & Economics |
ISBN | : 1451930119 |
To mitigate the risks of contagion from problems arising in the banking sector, many countries operate some form of banking sector safety net. Such safety nets generally involve a judicious mixture of transparency and ambiguity. This ambiguity may be important to counter moral hazard effects but may lead to excessive forbearance in the face of banking problems. While the scope for ambiguity has been declining, some ambiguity in the handling of individual institutions remains. In any case, ex post transparency is essential for reviewing the propriety of any assistance and preserving the authorities’ future reputation and policy credibility.
Author | : Ravi Kumar Jain |
Publisher | : SBS Publishers |
Total Pages | : 226 |
Release | : 2012-01-01 |
Genre | : Banks and banking, Central |
ISBN | : 9788131427095 |
CONTENTS: Central Banking Governance -- Insights; Central Bank Independence & Governance: Definitions & Modelling; Central Bank Independence & Policy Results: Theory & Evidence; Communicating a Policy Path: The Next Frontier in Central Bank Transparency?; Governance Structures & Decision -- Making Roles in Inflation Targeting Central Banks; Central Bank Governance: Maintaining Arm's Length from those in Power; Risk Based Supervision: Legal & Supervisory Implications; Central Bank Financial Strength, Transparency, & Policy Credibility; Payment System Governance; Transparency & Communication Policy in Japan; Rising New Governance Regime in Monetary Policy: A Review of ECB & Fed.
Author | : Åke Lönnberg |
Publisher | : International Monetary Fund |
Total Pages | : 48 |
Release | : 2008 |
Genre | : Business & Economics |
ISBN | : |
Conventional economic policy models focus only on selected elements of the central bank balance sheet, in particular monetary liabilities and sometimes foreign reserves. The canonical model of an "independent" central bank assumes that it chooses money (or an interest rate), unconstrained by a need to generate seignorage for itself or government. While a long line of literature has emphasized the dangers of fiscal dominance influencing the conduct of monetary policy the idea that an independent central bank could be constrained in achieving its policy objectives by its own balance sheet situation is a relatively novel idea considered in this paper. If one accepts this potential constraint as a valid concern, the financial strength of the central bank as a stand alone entity becomes highly relevant for ascertaining monetary policy credibility. We consider several strands of evidence that clearly indicate fiscal backing for central banks cannot be assumed and hence financial independence is relevant to operational independence. First we examine 135 central bank laws to illustrate the variety of legal approaches adopted with respect to central bank financial independence. Second, we examine the same data set with regard to central bank recapitalization provisions to show that even in cases where the treasury is nominally responsible for maintaining the central bank financially strong, it may do so in purely a cosmetic fashion. Third, we show that, in actual practice, treasuries have frequently not provided central banks with genuine financial support on a timely basis leaving them excessively reliant on seignorage to finance their operations and/or forcing them to abandon policy objectives.
Author | : Sue Milton |
Publisher | : Routledge |
Total Pages | : 225 |
Release | : 2010-10-12 |
Genre | : Business & Economics |
ISBN | : 1136895906 |
This collection takes the reader through historical, theoretical and factual discussions on why central banks exist and the role – actual and intended – they have in assisting their home nation in achieving monetary and financial stability.
Author | : Perry Warjiyo |
Publisher | : Emerald Group Publishing |
Total Pages | : 487 |
Release | : 2019-07-25 |
Genre | : Business & Economics |
ISBN | : 1789737532 |
Central Bank Policy: Theory and Practice analyses various policies, theories and practices adopted by central banks, as well as the institutional arrangements underlying the principles of good governance in policy-making. It is the first book to comprehensively discuss the latest theories and practices of central bank policy.
Author | : Ulrich H. Klueh |
Publisher | : INTERNATIONAL MONETARY FUND |
Total Pages | : 45 |
Release | : 2008-07-01 |
Genre | : |
ISBN | : 9781451870343 |
The financial health of central banks and its relation to policy outcomes has recently been recognized as an important policy issue. While case study evidence clearly indicates that weak central bank finances can hamper effective policy implementation, the question of whether central bank financial strength influences policy performance remains controversial. This is due, in part, to a lack of econometric evidence. The paper presents a first step toward filling this gap, by providing a quantitative evaluation of the relationship between measures of central bank financial strength and policy performance, in particular inflation. The paper's major finding is that there indeed is a negative relationship between central bank financial strength and inflation outcomes. This relationship appears to be robust to the choice of alternative country samples, control variables, estimation strategies, and conceptualizations of central bank financial strength.
Author | : Mr.Timo Valila |
Publisher | : International Monetary Fund |
Total Pages | : 17 |
Release | : 1999-01-01 |
Genre | : Business & Economics |
ISBN | : 1451841744 |
The specific role of central bank independence in determining the overall credibility of monetary policy is addressed in this paper. It is argued that the credibility of delegating monetary policy to an independent central bank is endogenous to the credibility of the inflation target because a “conservative” inflation target may not be compatible with the fiscal policy stance. Also, lack of transparency in designing the institutional set-up is shown to be welfare-reducing.