Monetary policy normalization, central bank profits, and seigniorage

Zbigniew Polański and Mikołaj Szadkowski

No 348, NBP Working Papers from Narodowy Bank Polski

Abstract: This paper advances a simple framework explaining how monetary policy normalization (“exit policies”) may impact central bank profits and seigniorage formation with further implications for central bank transfers to the government. The cases of seven central banks of major and smaller economies serve as an illustration. The notion of the break-even point is applied to study the financial situation of these institutions for the period of 2014-2020. During the normalization process, interest rate increases may adversely affect profit changes, and through transfers may have an impact on the fiscal space available to the governments, creating political economy concerns. Possible remedies are discussed together with accompanying policy dilemmas.

Keywords: central bank profit; seigniorage; break-even point; monetary policy normalization; exit policies (search for similar items in EconPapers)
JEL-codes: E52 E58 E59 (search for similar items in EconPapers)
Pages: 46
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://static.nbp.pl/publikacje/materialy-i-studia/348_en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:348

Access Statistics for this paper

More papers in NBP Working Papers from Narodowy Bank Polski Contact information at EDIRC.
Bibliographic data for series maintained by Jakub Growiec ().