Central Bank Losses: Causes and Consequences

14 Pages Posted: 10 May 2011

Date Written: May 2011

Abstract

This paper seeks to understand the causes and consequences of central banks' losses. Ignorance of this vital issue over a sustained period has led to negative impacts on economies and on central banking and monetary policy effectiveness. Data from developing countries and economies in transition show that central bank losses have reached significant magnitudes. Engaging in quasi-fiscal activities is responsible for most such losses because it increases central banks' expenditures. The main features of these fiscal activities are their large size and riskiness, and they are difficult to control. Central bank revenues can also be negatively affected because of declines in inflation rates and in the demand for money.

Suggested Citation

Sweidan, Osama D., Central Bank Losses: Causes and Consequences (May 2011). Asian-Pacific Economic Literature, Vol. 25, Issue 1, pp. 29-42, 2011, Available at SSRN: https://ssrn.com/abstract=1837160 or http://dx.doi.org/10.1111/j.1467-8411.2011.01281.x

Osama D. Sweidan (Contact Author)

University of Sharjah ( email )

P.O.Box 27272
Sharjah
United Arab Emirates
+971 6 5053572 (Phone)

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