Can the central bank alleviate fiscal burdens?

Ricardo Reis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Central banks affect the resources available to fiscal authorities through the impact of their policies on the public debt, as well as through their income, their mix of assets, their liabilities, and their own solvency. This paper inspects the ability of the central bank to alleviate the fiscal burden by in uencing different terms in the government resource constraint. It discusses five channels: (i) how in ation can (and cannot) lower the real burden of the public debt, (ii) how seignorage is generated and subject to what constraints, (iii) whether central bank liabilities should count as public debt, (iv) how central bank assets create income risk, and whether or not this threatens its solvency, and (v) how the central bank balance sheet can be used for fiscal redistributions. Overall, it concludes that the scope for the central bank to lower the fiscal burden is limited.

Keywords: Monetary Policy; Reserves; Interest Rates; Quantitative Easing (search for similar items in EconPapers)
JEL-codes: E52 E58 E63 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2017-12
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://eprints.lse.ac.uk/74324/ Open access version. (application/pdf)

Related works:
Working Paper: Can the Central Bank Alleviate Fiscal Burdens? (2017)
Working Paper: Can the Central Bank Alleviate Fiscal Burdens? (2016)
Working Paper: Can the Central Bank Alleviate Fiscal Burdens? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:74324

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