Public Liquidity Demand and Central Bank Independence

46 Pages Posted: 14 Jan 2020

See all articles by Jean Barthelemy

Jean Barthelemy

Banque de France

Guillaume Plantin

Sciences Po

Eric Mengus

HEC Paris - Economics & Decision Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: January 2020

Abstract

This paper studies how private demand for public liquidity affects the independence of a central bank vis-à-vis the fiscal authority. Whereas supplying liquidity to the private sector creates degrees of freedom for fiscal and monetary authorities vis-à-vis each other, we show that the authority that is most able to attract private liquidity demand can ultimately impose its views to the other.

Keywords: Central Bank Independence, Low Rates, Game of Chicken, Demand for Liquidity

JEL Classification: E50; E42; E63; C72

Suggested Citation

Barthelemy, Jean and Plantin, Guillaume and Mengus, Eric, Public Liquidity Demand and Central Bank Independence (January 2020). Banque de France Working Paper No. 747, 2020, Available at SSRN: https://ssrn.com/abstract=3518309 or http://dx.doi.org/10.2139/ssrn.3518309

Jean Barthelemy (Contact Author)

Banque de France ( email )

Paris
France

Guillaume Plantin

Sciences Po ( email )

28 Rue des S. Peres
Paris
France

HOME PAGE: http://www.gplantin.net/

Eric Mengus

HEC Paris - Economics & Decision Sciences ( email )

Paris
France

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