{
  "title": "Central Banks Use of Derivatives and Other Contingent Liabilities: Analytical Issues and Policy Implications",
  "publication": "IMF Working Papers, March 1, 2000",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/central-banks-use-of-derivatives-and-other-contingent-liabilities-analytical-issues-and-3548",
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  "summary": "Whereas some central bank derivatives and other contingent liabilities arise from anomalous circumstances, there are a number of positive reasons that explain their popularity.",
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      "heading": "Summary",
      "content": "- Some central bank derivatives and other contingent liabilities arise from anomalous circumstances, but there are a number of positive reasons that explain their popularity.\n- Most of these operations are off-balance sheet; as a result they:\n  - increase the risk of central bank accounts, and\n  - reduce the transparency of central bank accounts.\n- Reduced transparency and higher off-balance-sheet risk make more difficult the assessment of:\n  - the financial position of the monetary authority, and\n  - by implication, the macroeconomic conditions of the country.\n- To address these problems, the authors suggest a comprehensive portfolio approach that values, in an economic sense, all assets and liabilities of the central bank."
    },
    {
      "heading": "Analytical findings",
      "content": "- Off-balance-sheet status of derivatives and contingent liabilities:\n  - Increases risk in central bank accounts.\n  - Reduces transparency of central bank accounts.\n- Assessment implications:\n  - Hinders accurate evaluation of the monetary authority’s financial position.\n  - Complicates assessment of macroeconomic conditions.\n- Rationale for central bank usage:\n  - While some operations stem from anomalous events, multiple positive motivations explain the popularity of derivatives and contingent liabilities for central banks."
    },
    {
      "heading": "Policy recommendations and approach",
      "content": "- Adopt a comprehensive portfolio approach that:\n  - Values, in an economic sense, all assets and liabilities of the central bank.\n  - Brings off-balance-sheet items into an economic valuation framework to improve transparency and risk assessment.\n\n---\n\n Content in this bundle\n\n- wp0066\n  - wp0066 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp0066 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/central-banks-use-of-derivatives-and-other-contingent-liabilities-analytical-issues-and-3548"
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    "Authors: Miss Liliana B Schumacher, Mario I. Bléjer",
    "Published: March 1, 2000",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451848786.001",
    "Some central bank derivatives and other contingent liabilities arise from anomalous circumstances, but there are a number of positive reasons that explain their popularity.",
    "Most of these operations are off-balance sheet; as a result they:",
    "Reduced transparency and higher off-balance-sheet risk make more difficult the assessment of:",
    "To address these problems, the authors suggest a comprehensive portfolio approach that values, in an economic sense, all assets and liabilities of the central bank.",
    "Off-balance-sheet status of derivatives and contingent liabilities:",
    "Assessment implications:",
    "Rationale for central bank usage:",
    "Adopt a comprehensive portfolio approach that:",
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