Chapter 7 Financial Ratios of the Central Bank Balance Sheet
Two main aspects of central bank balance sheet financial ratios are particularly useful. First, they assist users in analyzing the ability of the central bank to safeguard the value of a currency, for example, in the foreign-exchange market. Second, financial ratios reveal possible limitations in the central bank’s position, and highlight potential problems such as insolvency; ratios can act as an early warning system and press authorities into action to strengthen or recapitalize the central bank. These ratios allow the quality of money and the health of the central bank to be measured in a somewhat objective manner.
The absence of homogenous data makes international comparisons of ...
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