Do Central Banks Need Capital?

39 Pages Posted: 15 Feb 2006

Date Written: July 1997

Abstract

Central banks may operate perfectly well without capital as conventionally defined. A large negative net worth, however, is likely to compromise central bank independence and interfere with its ability to attain policy objectives. If society values an independent central bank capable of effectively implementing monetary policy, recapitalization may become essential. Proper accounting practice in determining central bank profit or loss and rules governing the transfer of the central bank`s operating result to the treasury are also important. A variety of country-specific central bank practices are reviewed to support the argument.

JEL Classification: E58

Suggested Citation

Stella, Peter, Do Central Banks Need Capital? (July 1997). IMF Working Paper, Vol. , pp. 1-39, 1997. Available at SSRN: https://ssrn.com/abstract=882586

Peter Stella (Contact Author)

Stellar Consulting ( email )

2019 Powhatan Street
Falls Church, VA 22043
United States

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