(Why) do central banks care about their profits?

Igor Goncharov (), Vasso Ioannidou () and Martin C. Schmalz ()
Additional contact information
Igor Goncharov: Lancaster University
Vasso Ioannidou: Lancaster University
Martin C. Schmalz: University of Oxford, CEPR, and ECGI

No 18, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We document that central banks are significantly more likely to report slightly positive profits than slightly negative profits, especially amid greater political pressure, the public’s receptiveness to more extreme political views, and when governors are reappointable. The propensity to report small profits over small losses is correlated with more lenient monetary policy and higher inflation. We conclude that profitability concerns, although absent from standard theory, are present and effective in practice. These findings inform a debate about the political economy of central banking, monetary stability, and the effectiveness of non-traditional central banking.

Keywords: Central Banks; Profitability; Non-Traditional Central Banking; Monetary Stability (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2020-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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