scholarly journals A Real Bonds Doctrine

2021 ◽  
pp. 2633190X2098441
Author(s):  
Romar Correa
Keyword(s):  
Artificial Intelligence ◽  
Central Bank ◽  
New Deal ◽  
Balance Sheet ◽  
Central Banks ◽  
Jel Classification ◽  
Government Bond ◽  
Public Firms ◽  
The Government ◽  
And Robotics

Two assumptions drive our policy construct. First, the task of implementing a Green New Deal will necessarily fall on the government. Second, artificial intelligence (AI) and robotics have meant a reduction in labour in the production process. The connection between the two is production by public firms, and the financial instrument is the government bond. The Real Bills doctrine meant the tracking of credit disbursed by commercial and central banks with the returns realized by borrowing firms. The horizon was finite. In the case of our bond, the issuer is the government, and the horizon is infinite. Balance sheet accounts with the central bank are maintained. We write down a model with no labour. Households lend to the government, which, in turn, lends to firms to purchase their capital inputs. Households earn returns from their holdings of the government bond. The central bank mediates the accounts. JEL Classification: E16, E58, E64

scholarly journals Can the Central Bank Alleviate Fiscal Burdens?

2019 ◽  
pp. 130-170
Author(s):  
Ricardo Reis
Keyword(s):  
Central Bank ◽  
Public Debt ◽  
Balance Sheet ◽  
Central Banks ◽  
Resource Constraint ◽  
Income Risk ◽  
The Real ◽  
The Public ◽  
The Government ◽  
The Impact

Central banks affect the resources available to fiscal authorities through the impact of their policies on the public debt, as well as through their income, their mix of assets, their liabilities, and their own solvency. This chapter inspects the ability of the central bank to alleviate the fiscal burden by influencing different terms in the government resource constraint. It discusses five channels: (i) how inflation can (and cannot) lower the real burden of the public debt, (ii) how seigniorage is generated and subject to what constraints, (iii) whether central bank liabilities should count as public debt, (iv) how central bank assets create income risk and whether or not this threatens its solvency, and (v) how the central bank balance sheet can be used for fiscal redistributions. Overall, it concludes that the scope for the central bank to lower the fiscal burden is limited.

scholarly journals Macroeconomic Models for Monetary Policy: A Critical Review from a Finance Perspective

2020 ◽  
Vol 12 (1) ◽  
pp. 95-140
Author(s):  
Winston W. Dou ◽  
Andrew W. Lo ◽  
Ameya Muley ◽  
Harald Uhlig
Keyword(s):  
Monetary Policy ◽  
Risk Premium ◽  
Critical Review ◽  
Balance Sheet ◽  
Financial Sector ◽  
Central Banks ◽  
Response Analysis ◽  
Parameter Estimates ◽  
Macroeconomic Models ◽  
The Government

We provide a critical review of macroeconomic models used for monetary policy at central banks from a finance perspective. We review the history of monetary policy modeling, survey the core monetary models used by major central banks, and construct an illustrative model for those readers who are unfamiliar with the literature. Within this framework, we highlight several important limitations of current models and methods, including the fact that local-linearization approximations omit important nonlinear dynamics, yielding biased impulse-response analysis and parameter estimates. We also propose new features for the next generation of macrofinancial policy models, including a substantial role for the financial sector, the government balance sheet, and unconventional monetary policies; heterogeneity, reallocation, and redistribution effects;the macroeconomic impact of large nonlinear risk premium dynamics; time-varying uncertainty; financial sector and systemic risks; imperfect product market and markups; and further advances in solution, estimation, and evaluation methods for dynamic quantitative structural models.

Analysis of the Analytical Balance Sheet of Central Bank of Republic of Turkey During 2000 - 2009 Period in Terms of Crises

2014 ◽  
pp. 1284-1302
Author(s):  
Yıldız Özkök
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Balance Sheet ◽  
Central Banks ◽  
Money Market ◽  
Price Stability ◽  
Primary Target ◽  
Monetary Aggregates ◽  
Analytical Balance ◽  
Republic Of Turkey

Today, Central Banks' primary target is to maintain the price stability. In that context, through their monetary policy, they intervene in the money market with different tools. The Analytical Balance Sheet was created upon summing up and offsetting Balance Sheet of the Central Bank of Republic of Turkey (CBRT) in order to represent specific monetary aggregates. By means of that, CBRT aims to make the balance sheet more understandable and simple. In this chapter, firstly the sub items of the Analytical Balance Sheet are explained; secondly, the economic crises of Turkey during 2000-2009 is mentioned; finally, effects of these crises on the CBRT's Analytical Balance Sheet, changes in monetary aggregates which are Currency Issued, Reserve Money, Monetary Base, and Central Bank's Money, and in this context structure of the monetary policy of the CBRT in this period is analyzed.

The Investment Manager

2020 ◽  
pp. 275-295
Author(s):  
Einar Lie
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Market Value ◽  
Central Banks ◽  
Rapid Expansion ◽  
Financial Wealth ◽  
Investment Manager ◽  
The Government ◽  
Traditional Roles

This chapter assesses how the management of the nation’s long-term savings in what is now the Government Pension Fund Global brought Norges Bank a brand new responsibility from the mid-1990s, and an unusual one for a central bank. While many central banks have historically played an important part in contributing to government financing and investing government debt in liquid securities, this had never been one of Norges Bank’s main roles. Indeed, one of the key aims of the acts of 1816 and 1891 was to prevent the government from funding itself through the central bank. From the mid-1990s, however, Norges Bank was in a way given the opposite task: a separate mandate to manage the country’s financial wealth on behalf of the government by investing it abroad in long-term bonds, shares, and eventually real estate. Within twenty years, thanks to high oil prices and substantial inflows from the government, the fund’s market value soared from nothing to around NOK 7 trillion. In recent years, the fund’s rapid expansion and financial importance have brought Norges Bank—and Norway—at least as much international attention as the bank’s more traditional roles in monetary policy and financial stability.

Introduction and Overview

2019 ◽  
pp. 1-7
Author(s):  
Ulrich Bindseil
Keyword(s):  
Private Sector ◽  
Balance Sheet ◽  
Central Banks ◽  
Central Banking ◽  
Alternative View ◽  
Lender Of Last Resort ◽  
The Government

The Introduction describes the main themes and objectives of the book and provides an overview of its content. First, the current dominant view on the origins of central banking is recalled and challenged, and it is outlined what alternative view this book will propose, namely that central banking dates back to before 1800 and that a number of European continental institutions played a major role in its development. Then an overview of the chapters of the book is provided: Chapter 1 restating the currently dominant view on the origins of central banking; Chapter 2 on money issuance; Chapter 3 on the relation with the government; Chapter 4 on lending to the private sector; Chapter 5 on the lender-of-last resort; Chapter 6 on the overall balance sheet of early central banks; and Chapter 7 restating the rehabilitation of early central banking; The annex schematically reviews a total of 25 central banks operating before 1800.

scholarly journals Financial Independence of Central Bank through the Balance Sheet Prism

2014 ◽  
Vol 3 (2) ◽  
pp. 37-59 ◽  
Author(s):  
Valentina Ivanović
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Balance Sheet ◽  
Central Banks ◽  
Central Bank Independence ◽  
Financial Independence ◽  
Balance Sheets ◽  
Financial Strength ◽  
The Global Financial Crisis

Abstract The main reason for central bank independence lies in the fact that it is necessary to clearly distinguish spending money from the ability of making money. Independence of central banks is now a characteristic of almost all developed and highly industrialized countries. In this respect, it represents an essential part of the overall economic reality of these countries. Over the past decade or somewhat earlier, the issue of importance of central bank independence has been raised in developing countries, making the institutional, functional, personal and financial independence of central banks current topics for consideration. The key reason for the growing attention to financial independence of central banks is due to the effects of the global financial crisis on their balance sheets and therefore the challenges related to achieving the basic goals of the functioning of central banks - financial stability and price stability. Financial strength and independence of central banks must be developed relative to the policy and tasks that are carried out and risks they face in carrying out of these tasks. Financial independence represents a key base for credibility of a central bank. On one hand, the degree of credibility is associated with the ability of central banks to carry out their tasks without external financial assistance. In order to enhance the credibility of central bank in this regard, it must have sufficient financial strength to absorb potential losses and that power must be continuously strengthened by increasing capital and rearranging profit allocation arrangements. This is particularly important in times of crisis.

Central Banks at War

2014 ◽  
Vol 69 (1) ◽  
pp. 63-95 ◽  
Author(s):  
Paul Poast
Keyword(s):  
Central Bank ◽  
Government Debt ◽  
Central Banks ◽  
Borrowing Costs ◽  
The Government ◽  
Credibility Problem

AbstractWar is expensive—troops must be equipped and weapons must be procured. When the enormous borrowing requirements of war make the sovereigns' credibility problem more difficult, central banks enhance a government's ability to borrow. By being the sole direct purchaser of government debt, the central bank increases the effective punishment that can be imposed on the government for defaulting on the marginal lender. This increases lenders' confidence that the government will be punished in case of default, making lenders willing to purchase the debt at a lower rate of interest. The sovereign, dependent on the low borrowing costs offered by the central bank, has an incentive to retain the bank. Data covering the nineteenth and early twentieth centuries reveal that possessing a central bank lowers the sovereign's borrowing costs, particularly during times of war.

scholarly journals Second Thoughts About Central Bank Digital Currencies

2021 ◽  
Vol 9 (1) ◽  
pp. 1
Author(s):  
Arto Kovanen
Keyword(s):  
Central Bank ◽  
Financial Markets ◽  
Balance Sheet ◽  
Modern Society ◽  
Central Banks ◽  
Settlement Systems ◽  
Digital Currency ◽  
Credit Risks ◽  
Institutional Structures ◽  
The Status

Sustained decline in central banks’ monetary liabilities (reserves and currency in circulation), which the emergency of cryptocurrencies may have hastened, has been enabled by technological innovations that over time have allowed financial institutions and their customers to execute transactions and settle their debts without resorting to central bank currency. Policymakers are concerned about their ability to guarantee public’s access to government-backed currency. This has implications for central banks’ balance sheet and income position, which central bank digital currency might reconstitute. But the introduction of central bank digital currency (CBDC) comes with its own risks and could be disruptive for financial markets. We believe that retaining the option to have access to government-guaranteed currency is of utmost importance, despite the sporadic demand for physical currency in the modern society, but it could be addressed within existing institutional structures without the introduction of CBDC. However, policy authorities are right in seeking oversight and regulation for cryptocurrencies to address the destabilizing potential of cryptocurrencies for financial markets, and they should continue modernizing payment infrastructures to bring retail settlement systems at par with cryptocurrencies in terms of settlement speed but without associated liquidity and credit risks. These steps would preserve the status quo and allow private sector to continue innovating while limiting central banks’ footprint in the financial markets.

scholarly journals Central banks and civil war termination

2021 ◽  
pp. 002234332110381
Author(s):  
Ana Carolina Garriga
Keyword(s):  
Civil War ◽  
Central Bank ◽  
Interest Rates ◽  
Civil Wars ◽  
Central Banks ◽  
Central Bank Independence ◽  
War Termination ◽  
International Credit ◽  
The Government ◽  
Good Signal

The ability to finance conflict likely affects the odds of sustaining a war and succeeding in it. Recent literature explores rebel group funding, but far less is known about how states finance their own war efforts. This article posits that the design of central banks should affect civil war termination. In particular, it argues that central bank independence affects civil war termination through two channels. First, financial markets consider central bank independence as a good signal in terms of macroeconomic stability and debt repayment. In this way, independent central banks enhance the ability of the government to access credit to finance and end a civil war. Second, central bank independence is associated with lower inflation. Inflation control reduces one source of additional grievances that the civil war may impose on citizens. On a sample of civil wars between 1975 and 2009, central bank independence is associated with a substantial increase in the likelihood of war termination. When the form of termination is disaggregated, (higher) central bank independence is associated with a higher probability of government victory, relative to continued conflict and to other outcomes. Additional tests provide support for the argued mechanisms: during civil wars, countries with more independent central banks access international credit markets in better conditions – i.e. they pay lower interest rates, and receive longer grace and maturity periods on new debt. Furthermore, in countries experiencing civil wars, central bank independence is associated with lower inflation.

scholarly journals Central Banks

2021 ◽  
pp. 11-28
Author(s):  
Ulrich Bindseil ◽  
Alessio Fotia
Keyword(s):  
Central Bank ◽  
Commercial Banks ◽  
Balance Sheet ◽  
Banking System ◽  
Central Banks ◽  
Reserve Requirement ◽  
Money Creation ◽  
Reserve Banking ◽  
Bank Money

AbstractThis chapter develops further the role of a central bank and its interplay with commercial banks. Together, the two ensure the provision of liquidity to the economy, such that the real sectors are shielded from flows of funds originating from household and investors. We also disaggregate the banking system into two banks to represent deposit flows between banks and their impact on the central bank’s balance sheet, and to distinguish between what we call “relative” and “absolute” central bank intermediation. We then integrate deposit money creation by commercial banks into our system of financial accounts, and revisit some old debates, such as the limits of bank money creation and the role of related parameters that the central bank can set (not only the reserve requirement ratio, but also the collateral framework). Finally, we explain the concepts of “plain money” and “full reserve banking” within the financial accounts, and also discuss in this framework the recent proposals regarding central bank digital currency (CBDC).

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