Central Banks Use of Derivatives and Other Contingent Liabilities: Analytical Issues and Policy Implications

18 Pages Posted: 13 Feb 2006

See all articles by Mario I. Blejer

Mario I. Blejer

Central Bank of Argentina

Liliana B. Schumacher

International Monetary Fund (IMF) - Asia and Pacific Department; George Washington University - Department of International Business

Date Written: March 2000

Abstract

Whereas some central bank derivatives and other contingent liabilities arise from anomalous circumstances, there are a number of positive reasons that explain their popularity. After analyzing the rationale for these operations, we stress that most of these operations, being off-balance sheet, increase the risk and reduce the transparency of central bank accounts. This in turn makes more difficult the assessment of the financial position of the monetary authority and, by implication, of the macroeconomic conditions of the country. To deal with this issue, we suggest a comprehensive portfolio approach that values, in an economic sense, all assets and liabilities of the central bank.

Keywords: central bank, contingent liabilities

JEL Classification: E58, E53

Suggested Citation

Blejer, Mario I. and Schumacher, Liliana, Central Banks Use of Derivatives and Other Contingent Liabilities: Analytical Issues and Policy Implications (March 2000). IMF Working Paper No. 00/66, Available at SSRN: https://ssrn.com/abstract=879558

Mario I. Blejer (Contact Author)

Central Bank of Argentina

Reconquista 266
Edificio Central, piso 7
Buenos Aires, 1003
Argentina

Liliana Schumacher

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

George Washington University - Department of International Business ( email )

2023 G Street NW
Washington, DC 20052
United States
202-244-3971 (Phone)
202-244-3971 (Fax)

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