Abstract
This paper advances a simple framework explaining how monetary policy normalization (“exit policies”) may impact central bank profits. 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 2014–2021. 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.
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Articles in the same Issue
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Articles in the same Issue
- Frontmatter
- Editorial
- The Economists’ Voice, December Issue 2022, Editorial
- Policy Papers
- Sanctions are Costly for Citizens but Beneficial for Autocrats: A Political-Economic Perspective
- The New Advocacy for Autarky: Self-Sufficiency is Now Once Again Becoming Popular for Geopolitical Reasons
- Policy Rules Consistent with the FOMC’s Longer-Run Goals and Monetary Policy Strategy
- Monetary Policy Normalization and Central Bank Profits: A Break-Even Point Perspective
- Does Financial Dominance Explain the Recent Rise in Inflation?
- The Influence of Economic Freedom on the Shadow Economy in Developed and Developing Countries
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- EU Green Taxonomy Data – A First Vendor Survey
- EU Taxonomy: Mission Impossible
- Will the EU Taxonomy Impact the Trade Specialisation of European Economies?
- Green Finance and the EU-Taxonomy for Sustainable Activities: Why Using More Direct Environmental Policy Tools Is Preferable
- EU Taxonomy and ECB Monetary Policy: Moving Towards Centrally-Directed Green Capital Allocation?
- The EU Taxonomy’s (Potential) Effects on the Banking Sector and Bank Lending to Firms