IDEAS home Printed from https://ideas.repec.org/p/baf/cbafwp/cbafwp1635.html
   My bibliography  Save this paper

More than the Human Appendix: Fed Capital and Central Bank Financial Independence

Author

Listed:
  • Donato Masciandaro

Abstract

In 2002 in reviewing the role of the Federal Reserve System (FED) the United States General Accounting Office declared that” We found no widely accepted, analytically based criteria to show whether a central bank needs capital as a cushion against losses or how the level of such an account should be determined”; the FED capital has become somewhat like the human appendix, an organ whose function is no longer understood (Stella 2009). Is it still true? These short notes address the issue, using a Q&A exposition and taking the occasion the fact that the U.S. Government Accountability Office (GAO), has been asked by members of the Congress to study the implications of a recent dividend rate change for Federal Reserve Bank stock and the implications of modifying or eliminating the existing requirement that all member banks purchase stock issued by their respective Federal Reserve Bank.

Suggested Citation

  • Donato Masciandaro, 2016. "More than the Human Appendix: Fed Capital and Central Bank Financial Independence," BAFFI CAREFIN Working Papers 1635, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:baf:cbafwp:cbafwp1635
    as

    Download full text from publisher

    File URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp1635.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bernard Shull, 2012. "The Impact of Financial Reform on Federal Reserve Autonomy," Economics Working Paper Archive wp_735, Levy Economics Institute.
    2. Ricardo Reis, 2017. "QE in the Future: The Central Bank’s Balance Sheet in a Fiscal Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 65(1), pages 71-112, April.
    3. Dieter Gerdesmeier & Francesco Paolo Mongelli & Barbara Roffia, 2007. "The Eurosystem, the U.S. Federal Reserve, and the Bank of Japan: Similarities and Differences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(7), pages 1785-1819, October.
    4. Peter Conti-Brown, 2016. "The Power and Independence of the Federal Reserve," Economics Books, Princeton University Press, edition 1, number 10576.
    5. Benigno, Pierpaolo, 2016. "Designing Central Banks for Inflation Stability," CEPR Discussion Papers 11402, C.E.P.R. Discussion Papers.
    6. Frisell, Lars & Roszbach, Kasper & spagnolo, giancarlo, 2008. "Governing the Governors: A Clinical Study of Central Banks," Working Paper Series 221, Sveriges Riksbank (Central Bank of Sweden).
    7. Ricardo Reis, 2017. "QE in the Future: The Central Bank’s Balance Sheet in a Fiscal Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 65(1), pages 71-112, April.
    8. Buiter, Willem, 2008. "Can Central Banks Go Broke?," CEPR Discussion Papers 6827, C.E.P.R. Discussion Papers.
    9. Robert E. Hall & Ricardo Reis, 2015. "Maintaining Central-Bank Financial Stability under New-Style Central Banking," NBER Working Papers 21173, National Bureau of Economic Research, Inc.
    10. Del Negro, Marco & Sims, Christopher A., 2015. "When does a central bank׳s balance sheet require fiscal support?," Journal of Monetary Economics, Elsevier, vol. 73(C), pages 1-19.
    11. Masciandaro, Donato & Romelli, Davide, 2015. "Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics," Financial History Review, Cambridge University Press, vol. 22(3), pages 259-289, December.
    12. Aleksandra A. Maslowska, 2011. "Quest for the Best: How to Measure Central Bank Independence and Show its Relationship with Inflation," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(2), pages 132-161, August.
    13. Michael D. Bordo & Pierre L. Siklos, 2017. "Central Bank Credibility before and after the Crisis," Open Economies Review, Springer, vol. 28(1), pages 19-45, February.
    14. Sylvester Eijffinger & Donato Masciandaro (ed.), 2014. "Modern Monetary Policy and Central Bank Governance," Books, Edward Elgar Publishing, number 15692.
    15. Seth Carpenter & Jane Ihrig & Elizabeth Klee & Daniel Quinn & Alexander Boote, 2015. "The Federal Reserve's Balance Sheet and Earnings: A Primer and Projections," International Journal of Central Banking, International Journal of Central Banking, vol. 11(2), pages 237-283, March.
    16. Åke Lönnberg & Mr. Peter Stella, 2008. "Issues in Central Bank Finance and Independence," IMF Working Papers 2008/037, International Monetary Fund.
    17. Ricardo Reis, 2016. "QE in the future: the central bank's balance sheet in a financial crisis," Discussion Papers 1620, Centre for Macroeconomics (CFM).
    18. Mr. Peter Stella, 2009. "The Federal Reserve System Balance Sheet: What Happened and Why it Matters," IMF Working Papers 2009/120, International Monetary Fund.
    19. Peter Conti-Brown & Simon Johnson, 2013. "Governing the Federal Reserve System after the Dodd-Frank Act," Policy Briefs PB13-25, Peterson Institute for International Economics.
    20. Studener, Werner & Merriman, Niall & Karakitsos, Polychronis & Bunea, Daniela, 2016. "Profit distribution and loss coverage rules for central banks," Occasional Paper Series 169, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Donato Masciandaro & Davide Romelli, 2019. "Behavioral Monetary Policymaking: Economics, Political Economy and Psychology," World Scientific Book Chapters, in: Behavioral Finance The Coming of Age, chapter 9, pages 285-329, World Scientific Publishing Co. Pte. Ltd..
    2. Favaretto, Federico & Masciandaro, Donato, 2016. "Doves, hawks and pigeons: Behavioral monetary policy and interest rate inertia," Journal of Financial Stability, Elsevier, vol. 27(C), pages 50-58.
    3. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Ricardo Reis, 2016. "Can the Central Bank Alleviate Fiscal Burdens?," Discussion Papers 1701, Centre for Macroeconomics (CFM).
    5. Stephen Quinn & William Roberds, 2016. "Death of a Reserve Currency," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 63-103, December.
    6. Reis, Ricardo, 2016. "Funding quantitative easing to target inflation," LSE Research Online Documents on Economics 67883, London School of Economics and Political Science, LSE Library.
    7. Reis, Ricardo, 2016. "Funding quantitative easing to target inflation," LSE Research Online Documents on Economics 67883, London School of Economics and Political Science, LSE Library.
    8. Michal Franta & Tomas Holub & Branislav Saxa, 2018. "Balance Sheet Implications of the Czech National Bank's Exchange Rate Commitment," Working Papers 2018/10, Czech National Bank.
    9. Peter Spahn, 2016. "Central Bank Design in a Non-optimal Currency Union A Lender of Last Resort for Government Debt?," ROME Working Papers 201610, ROME Network.
    10. Reis, Ricardo, 2016. "Funding quantitative easing to target inflation," LSE Research Online Documents on Economics 67883, London School of Economics and Political Science, LSE Library.
    11. Pierpaolo Benigno & Salvatore Nisticò, 2020. "Non-neutrality of Open-Market Operations," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(3), pages 175-226, July.
    12. Julien Pinter, 2018. "Does Central Bank Financial Strength Really Matter for Inflation? The Key Role of the Fiscal Support," Open Economies Review, Springer, vol. 29(5), pages 911-952, November.
    13. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.
    14. van Riet, Ad, 2017. "Monetary Policy Stretched to the Limit: How Could Governments Support the European Central Bank?," MPRA Paper 83451, University Library of Munich, Germany.
    15. Donato Masciandaro, 2021. "Central Bank Governance in Monetary Policy Economics (1981-2020)," BAFFI CAREFIN Working Papers 21153, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    16. Masciandaro, Donato, 2022. "Independence, conservatism, and beyond: Monetary policy, central bank governance and central banker preferences (1981–2021)," Journal of International Money and Finance, Elsevier, vol. 122(C).
    17. Francesco Bianchi & Leonardo Melosi, 2017. "Escaping the Great Recession," American Economic Review, American Economic Association, vol. 107(4), pages 1030-1058, April.
    18. Christophe Blot & Jérôme Creel & Paul Hubert, 2016. "Rooms for extension of the ECB’s quantitative easing programme," SciencePo Working papers Main hal-03459414, HAL.
    19. Sascha Buetzer, 2022. "Advancing the Monetary Policy Toolkit through Outright Transfers," IMF Working Papers 2022/087, International Monetary Fund.
    20. Bianchi, Francesco & Melosi, Leonardo, 2019. "The dire effects of the lack of monetary and fiscal coordination," Journal of Monetary Economics, Elsevier, vol. 104(C), pages 1-22.

    More about this item

    Keywords

    Federal Reserve System; Central Bank Independence; Central Bank Capital; Global Crisis;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:baf:cbafwp:cbafwp1635. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michela Pozzi (email available below). General contact details of provider: https://edirc.repec.org/data/cbbocit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.