Unconventional Monetary Policies and Central Bank Profits: Seigniorage as Fiscal Revenue in the Aftermath of the Global Financial Crisis

Jörg Bibow

Economics Working Paper Archive from Levy Economics Institute

Abstract: This study investigates the evolution of central bank profits as fiscal revenue (or: seigniorage) before and in the aftermath of the global financial crisis of 2008-9, focusing on a select group of central banks--namely the Bank of England, the United States Federal Reserve System, the Bank of Japan, the Swiss National Bank, the European Central Bank, and the Eurosystem (specifically Deutsche Bundesbank, Banca d'Italia, and Banco de Espana)--and the impact of experimental monetary policies on central bank profits, profit distributions, and financial buffers, and the outlook for these measures going forward as monetary policies are seeing their gradual "normalization." Seigniorage exposes the connections between currency issuance and public finances, and between monetary and fiscal policies. Central banks' financial independence rests on seigniorage, and in normal times seigniorage largely derives from the note issue supplemented by "own" resources. Essentially, the central bank's income-earning assets represent fiscal wealth, a national treasure hoard that supports its central banking functionality. This analysis sheds new light on the interdependencies between monetary and fiscal policies. Just as the size and composition of central bank balance sheets experienced huge changes in the context of experimental monetary policies, this study's findings also indicate significant changes regarding central banks' profits, profit distributions, and financial buffers in the aftermath of the crisis, with considerable cross-country variation.

Keywords: Central Bank Profits; Seigniorage; Financial Crisis; Unconventional Monetary Policy; Monetary and Fiscal Policy; Central Bank Capital; Helicopter Money; Cryptocurrencies; Bitcoin (search for similar items in EconPapers)
JEL-codes: E41 E52 E58 E62 E65 G01 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon, nep-pay and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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