Central Bank Losses and Inflation: 350 Years of Evidence

Anna Grodecka-Messi (), Martin Kliem () and Gernot J. Muller ()
Additional contact information
Anna Grodecka-Messi: Financial Stability Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Martin Kliem: Deutsche Bundesbank
Gernot J. Muller: University of Tübingen, CEPR and CESifo

No 457, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Are central bank losses inflationary? We address this question at two levels. First, we revisit the theory and show that central bank losses constrain the conduct of monetary policy and are indeed inflationary provided the central bank is (a) not automatically recapitalized by the government and (b) concerned about its net worth. Second, we collect 350 years of data on the world’s oldest central bank, the Sveriges Riksbank. We construct a time series for its return on assets and a narrative measure of profitability shocks. We find that inflation increases strongly and persistently in response to exogenous declines in central bank profits.

Keywords: Inflation; Central Banks; Central Bank Profitability; Central Bank Losses; Sveriges Riksbank (search for similar items in EconPapers)
JEL-codes: E52 E58 N13 N14 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2025-11-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.riksbank.se/globalassets/media/rapport ... ears-of-evidence.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0457

Access Statistics for this paper

More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().