Central Bank Financial Strength and Policy Performance: An Econometric Evaluation
IMF Working Papers, July 1, 2008
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- Central Bank Financial Strength and Policy Performance: An Econometric Evaluation
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Bibliographic details
- Authors: Peter Stella, Ulrich H Klueh
- Published: July 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870343.001
Summary and main finding
- The paper provides a quantitative evaluation of the relationship between measures of central bank financial strength and policy performance, in particular inflation.
- The paper's major finding is that there indeed is a negative relationship between central bank financial strength and inflation outcomes.
- This negative relationship is reported as robust to:
- the choice of alternative country samples,
- control variables,
- estimation strategies,
- conceptualizations of central bank financial strength.
Motivation and research gap
- Case study evidence indicates that weak central bank finances can hamper effective policy implementation.
- Prior to this paper, the question of whether central bank financial strength influences policy performance lacked econometric evidence.
- The paper is presented as a first step toward filling this econometric gap.
Methodology (high-level)
- The study conducts an econometric evaluation linking measures of central bank financial strength to policy performance indicators, with a focus on inflation.
- Robustness checks include alternative country samples, alternative control variables, different estimation strategies, and different conceptualizations of central bank financial strength.
Key subjects and keywords
- Subjects: Banking, Central bank autonomy, Central bank balance sheet, Financial statements, Inflation
- Keywords: central bank financial strength, exchange rate, financial condition, WP