Central Bank Capital as an Instrument of Monetary Policy

Mojmir Hampl () and Tomas Havranek
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Mojmir Hampl: Czech National Bank, Na prikope 28, 115 03 Prague 1, Czech Republic

No 2018/25, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: We examine the use of central bank capital as an unconventional monetary policy tool. In this setting, a central bank employs digital currency to transfer digital cash to each household, thus supporting consumption directly when needed. The asset side of the central bank’s balance sheet remains unchanged, and the creation of new digital cash is offset by a decrease in central bank capital. The central bank thus incurs an immediate loss but does not take on any additional risks for its future income statements. We address several objections to this policy, paying particular attention to the claim that weakening the financial strength of the central bank endangers long-term price stability. Through a meta-analysis of 176 estimates reported previously in the literature, we find that central bank financial strength has not historically correlated with inflation performance.

Keywords: Central bank capital; inflation; seigniorage; monetary policy; helicopter money; central bank digital currency (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2018-10, Revised 2018-10
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pay
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Citations: View citations in EconPapers (2)

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Working Paper: Central Bank Capital as an Instrument of Monetary Policy (2018)
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