{
  "title": "Central Bank Financial Strength, Policy Constraints and Inflation",
  "publication": "IMF Working Papers, February 1, 2008",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/central-bank-financial-strength-policy-constraints-and-inflation-21718",
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  "summary": "Central bank financial strength is positively associated with good policy performance. Financially weak central banks generate losses which undermine macroeconomic stability and call into question the credibility of their policies.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- Central bank financial strength is positively associated with good policy performance.\n- Financially weak central banks generate losses which undermine macroeconomic stability and call into question the credibility of their policies.\n- Conventional measures of private enterprise financial strength—profitability and capital—can be very misleading when applied to central banks.\n- The way in which a central bank balance sheet is strengthened matters for both the institution and the environment in which it operates."
    },
    {
      "heading": "Assessment considerations and analytical points",
      "content": "- A careful examination of the policy regime and the volatility of the economic environment is necessary when assessing central bank financial strength.\n- Strengthening a central bank balance sheet by providing marketable government debt can:\n  - Directly strengthen the central bank institution.\n  - Be used to develop a money market that may become the locus of central bank monetary operations.\n  - Improve the quality of the environment in which the central bank operates, thereby facilitating attainment of ultimate performance objectives."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Avoid relying solely on private-sector financial metrics (profitability and capital) for evaluating central bank strength.\n- Consider balance-sheet instruments that both bolster the central bank and support development of domestic money markets, specifically marketable government debt that can be used in monetary operations.\n- Recognize that central bank losses can translate into macroeconomic instability and weaken policy credibility, warranting proactive balance-sheet and market-structure interventions."
    },
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      "heading": "Publication metadata and key statistics",
      "content": "- Author: Peter Stella\n- Publication date: February 1, 2008\n- Series: Working Paper No. 2008/049\n- Issue: 049\n- Volume: 2008\n- Pages: 25\n- DOI: https://doi.org/10.5089/9781451869118.001\n- Stock No: WPIEA2008049\n- ISBN: 9781451869118\n- ISSN: 1018-5941\n- Subject: Banking, Central bank balance sheet, Financial statements, Inflation, International reserves\n- Keywords: balance sheet, central bank loss, foreign exchange, performance reporting, rate of inflation, WP\n\nIMF Working Paper — Central Bank Financial Strength, Policy Constraints and Inflation (Peter Stella, February 1, 2008).\n\n---\n\n Content in this bundle\n\n- wp0849\n  - wp0849 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp0849 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/central-bank-financial-strength-policy-constraints-and-inflation-21718"
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    "Authors: Peter Stella",
    "Published: February 1, 2008",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451869118.001",
    "Central bank financial strength is positively associated with good policy performance.",
    "Financially weak central banks generate losses which undermine macroeconomic stability and call into question the credibility of their policies.",
    "Conventional measures of private enterprise financial strength—profitability and capital—can be very misleading when applied to central banks.",
    "The way in which a central bank balance sheet is strengthened matters for both the institution and the environment in which it operates.",
    "A careful examination of the policy regime and the volatility of the economic environment is necessary when assessing central bank financial strength.",
    "Strengthening a central bank balance sheet by providing marketable government debt can:",
    "Avoid relying solely on private-sector financial metrics (profitability and capital) for evaluating central bank strength.",
    "Consider balance-sheet instruments that both bolster the central bank and support development of domestic money markets, specifically marketable government debt that can be used in monetary operations.",
    "Recognize that central bank losses can translate into macroeconomic instability and weaken policy credibility, warranting proactive balance-sheet and market-structure interventions.",
    "Author: Peter Stella",
    "Publication date: February 1, 2008",
    "Series: Working Paper No. 2008/049",
    "Issue: 049",
    "Volume: 2008",
    "Pages: 25",
    "DOI: https://doi.org/10.5089/9781451869118.001",
    "Stock No: WPIEA2008049",
    "ISBN: 9781451869118",
    "ISSN: 1018-5941",
    "Subject: Banking, Central bank balance sheet, Financial statements, Inflation, International reserves",
    "Keywords: balance sheet, central bank loss, foreign exchange, performance reporting, rate of inflation, WP",
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