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Is the Bank of Japan's Financial Structure an Obstacle to Policy? Thomas F. Cargill Full Text of this Article (PDF 256K) Abstract: Central bank capital
and accounting measures of capital adequacy potentially constrain central
bank policy outcomes. Historical and institutional factors explain why
central banks are organized as public corporations; however, capital structure
design provides little predictive insight into policy outcomes. In fact,
focusing on accounting measures of capital adequacy and similar performance
indicators potentially interferes with monetary policy, especially in
extraordinary economic circumstances such as deflation. The Bank of Japan,
like the Federal Reserve in the 1930s, has overemphasized accounting measures
of central bank performance at the cost of nonoptimal policy outcomes. |
