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Monetary policy normalization, central bank profits, and seigniorage

Author

Listed:
  • Zbigniew Polański

    (SGH Warsaw School of Economics and National Bank of Poland)

  • Mikołaj Szadkowski

    (SGH Warsaw School of Economics and National Bank of Poland)

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.

Suggested Citation

  • Zbigniew Polański & Mikołaj Szadkowski, 2022. "Monetary policy normalization, central bank profits, and seigniorage," NBP Working Papers 348, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:348
    as

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    File URL: https://static.nbp.pl/publikacje/materialy-i-studia/348_en.pdf
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    References listed on IDEAS

    as
    1. Sayuri Shirai & Eric Alexander Sugandi, 2019. "Growing Global Demand for Cash," International Business Research, Canadian Center of Science and Education, vol. 12(12), pages 1-74, November.
    2. Atsushi Tanaka, 2021. "Central Bank Capital and Credibility: A Literature Survey," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(2), pages 249-262, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    central bank profit; seigniorage; break-even point; monetary policy normalization; exit policies;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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