Should a central bank transfer its profits to the treasury?

Lvarez-Parra, Fernando Á, Arreaza, Adriana and Zambrano, Eduardo (2018) Should a central bank transfer its profits to the treasury? Economía, 18 (2). 87 - 119. ISSN 1529-7470

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• https://economia.lse.ac.uk/articles/10.3...

Abstract

In this paper we show how two seemingly irrelevant accounting principles for central banks—namely, the choice of the unit of account for its balance sheet and the method of inventory valuation of foreign currency reserves—can overstate or understate profits transferred to the treasury and how this can threaten the ability of central banks to control inflation. We show the first point through Monte Carlo experiments calibrated for the Venezuelan economy and the second point in an infinitely lived representative agent model that illustrates the problem of the joint determination of the level of central bank assets and the size of profits transferred to the treasury when the objective of the central bank is to eliminate the possibility of hyperinflation.

Item Type:	Article
Official URL:	https://economia.lse.ac.uk/
Additional Information:	© 2018 LACTEA
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HJ Public Finance H Social Sciences > HB Economic Theory
JEL classification:	E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
Date Deposited:	10 Jul 2024 15:06
Last Modified:	10 Jul 2024 16:33
URI:	http://eprints.lse.ac.uk/id/eprint/123214

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