Central Banking Without Central Bank Money

By Alain Ize, Arto Kovanen, Timo Henckel

July 1, 1999

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Alain Ize, Arto Kovanen, and Timo Henckel. Central Banking Without Central Bank Money, (USA: International Monetary Fund, 1999) accessed October 6, 2024

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

Given the rapidly declining demand for central bank reserves and their gradual replacement in wholesale payments by alternative forms of money—clearinghouse moneyand treasury money—this paper discusses whether the complete extinction of base money could undermine monetary control. It argues that such concerns are misplaced since central banks can target interest rates and inflation even in the absence of base money. The paper explores implications for current and future central banking, including monetary and foreign exchange operations, lender of last resort, coordination between public debt and monetary management, and design of operating rules in currency boards.

Subject: Asset and liability management, Banking, Financial institutions, Financial markets, Liquidity, Monetary base, Money, Money markets, Payment systems, Treasury bills and bonds

Keywords: Balance sheet, Bank reserves, Central bank window, Debtor bank, Discount window, End-of-day liquidity support, Foreign exchange, Inflation targeting, Intervention band, Lender of last resort, Liquidity, Monetary base, Monetary operations, Monetary policy, Money market, Money markets, Payment systems, Payments system, Reaction function, Settlement balance, Treasury bills and bonds, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/092
Stock No:

WPIEA0921999
ISBN:

9781451851571
ISSN:

1018-5941

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