Capitalizing Central Banks: A Net Worth Approach
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Summary:
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.
Series:
Working Paper No. 2005/015
Subject:
Banking Currencies Expenditure International reserves Personal income
English
Publication Date:
January 1, 2005
ISBN/ISSN:
9781451860344/1018-5941
Stock No:
WPIEA2005015
Pages:
25
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