Central Bank Financial Strength in Central America and the Dominican Republic

 
Author/Editor: Andrew Swiston ; Florencia Frantischek ; Przemek Gajdeczka ; Alexander Herman
 
Publication Date: May 13, 2014
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper examines the financial strength of central banks in Central America and the Dominican Republic (CADR). Some central banks are working off the effects of intervention in distressed financial institutions during the 1990’s and early 2000’s. Their net income has improved since then owing to lower interest rates, a reduction in interest bearing debt, and recapitalization transfers. Claims on the government have fallen, but remain high and are typically reimbursed at below-market rates, and capital is negative when adjusting for this. Capital is sufficient to back a low inflation target given that the income position is supported by unremunerated reserve requirements. Capital is likely to increase over time, but only gradually, leaving countries vulnerable to macroeconomic risks. The capacity of CADR central banks to engage in macroeconomic stabilization would benefit from increased emphasis on low inflation as the primary objective of monetary policy and a stronger commitment by governments to recapitalization.
 
Series: Working Paper No. 14/87
Subject(s): Central banks | Dominican Republic | Central America | Capital | Demand for money | Accounting | Asset management

 
English
Publication Date: May 13, 2014
ISBN/ISSN: 9781484387368/1018-5941 Format: Paper
Stock No: WPIEA2014087 Pages: 39
Price:
US$18.00 (Academic Rate:
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