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Central Bank Balance Sheet and Real Business Cycles

Book Description

Central Bank Balance Sheet and Real Business Cycles argues that a deeper comprehension of changes to the central bank balance sheet can lead to more effective policymaking. Any transaction engaged in by the central bank—issuing currency, conducting foreign exchange operations, investing its own funds, intervening to provide emergency liquidity assistance and carrying out monetary policy operations—influences its balance sheet. Despite this, many central banks throughout the world have largely ignored balance sheet movements, and have instead focused on implementing interest rates.

In this book, Mustapha Abiodun Akinkunmi highlights the challenges and controversies faced by central banks in the past and present when implementing policies, and analyzes the links between these policies, the central bank balance sheet, and the consequences to economies as a whole. He argues that the composition and evolution of the central bank balance sheet provides a valuable basis for understanding the needs of an economy, and is an important tool in developing strategies that would most effectively achieve policy goals. This book is an important resource for anyone interested in monetary policy or whose work is affected by the actions of the policies of central banks.

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Dedication
  5. Contents
  6. Chapter 1: Global Genesis of the Central Bank
    1. 1.1 Origin of the Central Bank
    2. 1.2 Roles of the Central Bank
    3. Questions
  7. Chapter 2: Relevance of the Central Bank Balance Sheet
    1. 2.1 Understanding Relevance of Central Bank Balance Sheet in Functions of Economy
      1. 2.1.1 Similarities and Differences between a Company’s Balance Sheet and a Central Bank Balance Sheet
    2. 2.2 Trajectory Relevance of the Central Bank Balance Sheet
    3. 2.3 Externality of the Central Bank Balance Sheet Size
    4. Questions
  8. Chapter 3: Components of Central Bank Balance Sheets
    1. 3.1 Factors Influence the Reporting Frequency of Central Bank Balance Sheets
    2. 3.2 Components of Central Bank Assets and their Composition Analysis
      1. 3.2.1 Foreign Assets
    3. 3.3 Components of Central Bank Liabilities and their Composition Analysis
      1. 3.3.1 Banknotes
      2. 3.3.2 Commercial Bank Reserves
      3. 3.3.3 Capital
    4. Questions
  9. Chapter 4: Analytical Framework of Central Bank Balance Sheets
    1. 4.1 Structure of Central Bank Balance Sheets
    2. 4.2 Balance Sheet Indicators
      1. 4.2.1 Computation of Indicators
      2. 4.2.2 Significance of these Indicators
      3. 4.2.3 Underlying Assumptions of Four Indicators
    3. 4.3 Determinants of Central Bank Balance Sheet Composition
    4. 4.4 Classification of Central Bank Balance Sheet Components
    5. 4.5 Theoretical Landscape: Quantity Theory of Money versus Quality Theory of Money
      1. 4.5.1 Quantity Theory of Money
      2. 4.5.2 Quality Theory of Money
    6. Questions
  10. Chapter 5: Evolution of Central Bank Balance Sheets and Their Heterogeneous Dimensions
    1. 5.1 What Makes Central Bank Balance Sheets Special?
    2. 5.2 Historic Uses of Central Bank Balance Sheets
    3. 5.3 Composition of Central Bank Balance Sheet Liabilities
      1. 5.3.1 Central Bank Liabilities in Normal Times
      2. 5.3.2 Snapshot of Selected Economies’ Performance before the 2007–2008 Crisis
      3. 5.3.3 Country-by-Country Snapshots of Economic Structure Since 2005
      4. 5.3.4 A Look at the Balance Sheets: 2005 and 2006
      5. 5.3.5 Snapshot of Selected Economies’ Performance during the 2007–2008 Crisis
      6. 5.3.6 Snapshot of Selected Economies’ Performance Today
      7. 5.3.7 Central Bank Liabilities Today
    4. Conclusion
    5. Questions
  11. Chapter 6: Composition of Central Bank Balance Sheet Assets
    1. 6.1 Central Bank Assets in Normal Times
      1. 6.1.1 Central Bank Assets of Emerging Economies
    2. 6.2 Central Bank Assets During the 2007–2008 Crisis
      1. 6.2.1 Central Bank Assets of Developing and Emerging Economies during the 2007–2008 Crisis
    3. 6.3 Central Bank Assets Today
      1. 6.3.1 Central Bank Assets of Emerging Economies Today
    4. 6.4 Asset-Side Composition and Economic Growth Nexus
      1. 6.4.1 Asset-Growth Nexus before the 2007–2008 Crisis
      2. 6.4.2 Asset-Growth Nexus during the 2007–2008 Crisis
      3. 6.4.3 Asset-Growth Nexus after the 2007–2008 Crisis
    5. 6.5 The Evolution of Central Bank Balance Sheets in the Future
    6. Questions
  12. Chapter 7: Financial Ratios of the Central Bank Balance Sheet
    1. 7.1 International Strength
    2. 7.2 External Strength Ratio
    3. 7.3 External Impact Ratio
    4. 7.4 Liquidity Ratios I, II, and III
      1. 7.4.1 Liquidity Ratio I
      2. 7.4.2 Liquidity Ratio II
      3. 7.4.3 Liquidity Ratio III
    5. 7.5 Equity Ratio
    6. Questions
  13. Chapter 8: Central Bank Operations
    1. 8.1 Types of Central Bank Operations
      1. 8.1.1 Supply Liquidity
      2. 8.1.2 Absorb Excess Liquidity
      3. 8.1.3 Asset Securities
      4. 8.1.4 Off Balance Swap
    2. 8.2 Central Bank Policy Instruments
      1. 8.2.1 Open Market Operations
      2. 8.2.2 Reserve Requirements
      3. 8.2.3 Discount Rate
      4. 8.2.4 Money Market Investor Funding Facility
      5. 8.2.5 Term Auction Facility
      6. 8.2.6 Commercial Paper Funding Facility
      7. 8.2.7 Primary Dealer Credit Facility
      8. 8.2.8 Recap of Policy Instruments
    3. Questions
  14. Chapter 9: Real Business Cycles
    1. 9.1 The RBC Model
      1. 9.1.1 Features of RBC Models
      2. 9.1.2 Basic Economic Factors
      3. 9.1.3 Fluctuations in the Business Cycle
      4. 9.1.4 Boom and Recession
    2. 9.2 Concept of RBCs Applied to Economic Policy
    3. 9.3 Techniques of Estimating RBCs
    4. 9.4 Methods to Estimate Potential Output and Output Gaps
      1. 9.4.1 Trending Methods
      2. 9.4.2 Univariate Filters Method
      3. 9.4.3 Multivariate Filters
      4. 9.4.4 Production Function Approaches
      5. 9.4.5 Criteria for Evaluating Different Methods of Estimating Potential Output
    5. Questions
  15. Chapter 10: Central Bank Balance Sheets and Real Business Cycles
    1. 10.1 Linkages between Central Bank Balance Sheets and Real Business Cycles
      1. 10.1.1 Monetary Policies and Business Cycles
      2. 10.1.2 Identifying an Acceptable Range of Values
      3. 10.1.3 Asset Transparency
    2. 10.2 Impact Evaluation of Central Bank Balance Sheets on Economic Environment
      1. 10.2.1 Central Bank Balance Sheets and Debt Management
      2. 10.2.2 Modeling Challenges Confronting Central Bank Balance Sheets
    3. Questions
  16. Chapter 11: Conclusion
    1. Questions Left Unanswered: Areas for Future Research
    2. Policy Debates
  17. Appendix I: Central Bank Balance Sheets of Different Countries
    1. Asia Region
      1. Malaysia’s Central Bank Balance Sheets for the Month of February 2018
      2. Monetary Authority of Singapore
    2. Africa Region
      1. Nigeria’s Central Bank Balance Sheets for the Month of November 2017
    3. South America
      1. Central Reserve Bank of Peru
      2. Brazil
      3. Chile
      4. Argentina
    4. North America
      1. Mexico
      2. Canada
      3. United States
  18. Appendix II: Abbreviations
  19. References
  20. Index