Central bank equity: facts and analytics

Sujan Bandyopadhyay, Rishab Devnani, Sudipta Ghosh and Amartya Lahiri ()
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Sujan Bandyopadhyay: Arizona State University
Rishab Devnani: Independent Researcher
Sudipta Ghosh: University of British Columbia
Amartya Lahiri: University of British Columbia

Indian Economic Review, 2021, vol. 56, issue 1, No 11, 255-279

Abstract: Abstract How much capital should the central bank of a country hold? There is no consensus on this matter. We review the balance sheets of 45 central banks from around the world to describe actual practices. The principal findings are: (a) the average capital-asset ratio of central banks globally (net of revaluation capital which is purely an accounting entry) is 6.56 percent while the number in emerging economies is 6.96 percent; and (b) our Value-at-Risk estimates for the RBI excluding exchange rate risk indicate that the current level of the core capital of the RBI as mandated by the Jalan committee may be too low. We also discuss the policy moral hazards associated with mandating RBI equity payouts to the government.

Keywords: Central bank equity; Value at risk; Policy moral hazard (search for similar items in EconPapers)
JEL-codes: E02 E58 E61 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s41775-021-00112-x

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