Impact of the central bank’s financial result on the transfers of benefits across sectors of the economy

This paper presents an analysis of the impact of the central bank’s financial result and its components on the inter-sectoral transfers of benefits and the creation of central bank money. Transfers of benefits depend on the structure of the central bank’s balance sheet and its financial result. The structure of its balance sheet, its financial result as well as profit distribution influence central bank money creation. If the central bank records a profit, fully transferred to the state budget, and its assets are mainly denominated in domestic currency, then the central bank’s financial result can be seen only as a tool for intermediation in the transfer of benefits between different sectors of the national economy. In such a situation, the bank’s financial result does not affect the volume of the central bank’s money. On the other hand, if the central bank records a profit, fully paid to the state budget, and its assets are mainly denominated in foreign currency, then there is a transfer from foreign entities to the domestic economy, and there is simultaneously an increase in central bank money volume. However, if the central bank incurs a loss and the loss is not covered, for example, by the government, then the central bank transfers benefits directly from itself to other sectors of the economy, and regardless of the structure of its balance sheet, there is an increase in the central bank’s money issuance.