Staff, Functions, and Staff Costs at Central Banks: An International Comparison with a Labor-Demand Model

Borradores de Economía, No. 419, Noviembre, 2006

Publicado en Money Affairs, Centro de Estudios Monetarios Latinoamericanos CEMLA, Vol. 20, No. 2, pp. 131-180, Jul-Dic, 2007

43 Pages Posted: 11 Mar 2010 Last revised: 2 Mar 2012

See all articles by Jorge E. Galán

Jorge E. Galán

Banco de España

Miguel Sarmiento

Tilburg University, CentER, European Banking Center (EBC); Central Bank of Colombia

Date Written: November 17, 2006

Abstract

During the period 2000-2004 central banks sustained a generalized reduction in their staff, which was accompanied, in most cases, with significant increases in staff costs. This could obey to an enhanced interest of central banks in focusing on their core functions. In fact, central banks have changed the ways they perform their operative functions (e.g. currency operations, payment systems operation, printing notes, etc.) through different strategies aimed at gathering the participation of third parties. These strategies differ according to the relationship that central banks have with the financial sector and the government, as well as to their historical tradition and modernization trend. To explain the effect of these changes on the staff, we estimated a short-term labor demand function for 66 central banks using a panel data model with random effects. Results indicate that central banks’ labor demand is strongly determined by the country’s population, economic development level and changes in operative functions, as well as by staff costs. In addition, we found a low employment-wage elasticity suggesting the presence of a flexible budgetary constrain in central banks.

Keywords: Central Banking, Labor Demand, Modernization, Functions, Staff Costs, Panel Data, Random Effects

JEL Classification: E50, J23, J30, C33

Suggested Citation

Galán, Jorge E. and Sarmiento, Miguel, Staff, Functions, and Staff Costs at Central Banks: An International Comparison with a Labor-Demand Model (November 17, 2006). Borradores de Economía, No. 419, Noviembre, 2006. Available at SSRN: https://ssrn.com/abstract=1568182

Jorge E. Galán

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Miguel Sarmiento (Contact Author)

Tilburg University, CentER, European Banking Center (EBC) ( email )

Tilburg
Netherlands

HOME PAGE: http://https://scholar.google.com/citations?user=n2FzTYAAAAAJ&hl=es&oi=ao

Central Bank of Colombia ( email )

Carrera 7 #14-78
3551 de Bogotá
Colombia

HOME PAGE: http://www.banrep.gov.co/

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