Central Bank Finances

Using The Federal Reserve’s Balance Sheet to Predict Macroeconomic Outcomes

“…abandoning the Fed's other mandate to stimulate output), limiting Fed independence through Congressional audits of monetary policy, and reducing Fed discretion (e.g. forcing the Fed to follow a mathematical formula when setting interest rates) (Applebaum 2015). My study provides empirical evidence consistent with the Fed considering political costs when making monetary policy decisions.…”

“…If these losses are large enough, then the Fed may fail to remit any profits back to the U.S. Treasury. Failure to make remittances to the U.S. Treasury could increase the national deficit, disrupt financial markets, invite negative press, and result in increased political oversight of the Federal Reserve by Congress (Rudebusch 2011, Archer and Moser-Boehm 2013, Bilkre 2016). Thus, central bankers could face a principal-agent conflict where they are forced to choose between socially optimal monetary policy action and avoiding political costs (Kluh and Stella 2008).…”

Surviving Low Interest Rates Central Banks in Kosovo and Other Western Balkan Countries

“…But even when the central bank's mandate is constrained by the exchange rate framework (e.g., in dollarized economies), financial weakness may still impair the effective implementation of central bank mandates. For example, a central bank relying on budget transfers to finance its operations may be more prone to undue influence from the government, which would affect its de facto independence (Archer and Boehm, 2013).…”

“…Most central banks in the region have legislation allowing or requiring the recapitalization of central banks by the budget when equity buffers fall below certain thresholds; this is a positive element. However, central banks facing constrained income streams should avoid becoming dependent on budgetary support to finance their operations, as this may lead to political constraints and even policy expectations that are against central bank policy goals (Archer and Boehm, 2013). Moreover, a few central banks are required to make transfers to the budget, even when they have losses.…”

Should a Central Bank Transfer Its Profits to the Treasury?

“…In contrast, according to the ECB survey, unrealized gains from assets are not distributable profits for the majority of banks (forty-two out of fifty-six), 17. See Archer and Moser-Boehm (2013). 18.…”