(Why) do central banks care about their profits?
We document that central banks are discontinuously more likely to report slightly positive profits than slightly negative profits, especially when political pressure is greater, the public is more receptive to extreme political views, and central bank governors are eligible for reappointment. The pr...
Main Authors: | , , |
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Format: | Journal article |
Language: | English |
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Wiley
2023
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_version_ | 1797111316149698560 |
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author | Goncharov, I Ioannidou, V Schmalz, MC |
author_facet | Goncharov, I Ioannidou, V Schmalz, MC |
author_sort | Goncharov, I |
collection | OXFORD |
description | We document that central banks are discontinuously more likely to report slightly positive profits than slightly negative profits, especially when political pressure is greater, the public is more receptive to extreme political views, and central bank governors are eligible for reappointment. The propensity to report small profits over small losses is correlated with higher inflation and lower interest rates. We conclude that there are agency problems at central banks, which give rise to discontinuous profit incentives that correlate with central banks’ policy choices and outcomes. These findings inform the debate about the political economy of central banking and central bank design. |
first_indexed | 2024-03-07T08:07:01Z |
format | Journal article |
id | oxford-uuid:b4d7244d-0ef8-46a0-bbb7-fafe53399265 |
institution | University of Oxford |
language | English |
last_indexed | 2024-03-07T08:07:01Z |
publishDate | 2023 |
publisher | Wiley |
record_format | dspace |
spelling | oxford-uuid:b4d7244d-0ef8-46a0-bbb7-fafe533992652023-11-02T10:56:39Z(Why) do central banks care about their profits?Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:b4d7244d-0ef8-46a0-bbb7-fafe53399265EnglishSymplectic ElementsWiley2023Goncharov, IIoannidou, VSchmalz, MCWe document that central banks are discontinuously more likely to report slightly positive profits than slightly negative profits, especially when political pressure is greater, the public is more receptive to extreme political views, and central bank governors are eligible for reappointment. The propensity to report small profits over small losses is correlated with higher inflation and lower interest rates. We conclude that there are agency problems at central banks, which give rise to discontinuous profit incentives that correlate with central banks’ policy choices and outcomes. These findings inform the debate about the political economy of central banking and central bank design. |
spellingShingle | Goncharov, I Ioannidou, V Schmalz, MC (Why) do central banks care about their profits? |
title | (Why) do central banks care about their profits? |
title_full | (Why) do central banks care about their profits? |
title_fullStr | (Why) do central banks care about their profits? |
title_full_unstemmed | (Why) do central banks care about their profits? |
title_short | (Why) do central banks care about their profits? |
title_sort | why do central banks care about their profits |
work_keys_str_mv | AT goncharovi whydocentralbankscareabouttheirprofits AT ioannidouv whydocentralbankscareabouttheirprofits AT schmalzmc whydocentralbankscareabouttheirprofits |