This paper reviews how a central bank’s involvement in activities such as foreign exchange intervention and restructuring banking systems at the behest of the government may affect its balance sheet and the possible implications. Section 2 argues that if such operations leave the central bank with low, or even negative, capital its (perceived) independence and ability to conduct monetary policy may be affected. Section 3 sets out some stylised facts about central banks’ balance sheets, and highlights the role of seigniorage in increasing capital and that of the main quasi-fiscal activities in reducing capital.
Name | BIS Papers |
---|
Publisher | Bank for International Settlements |
---|
No. | 20 |
---|
Volume | 1682-7651 |
---|
ISSN (Print) | 1609-0381 |
---|