Limits of Monetary Policy Autonomy of East Asian Central Banks

Löffler, Axel; Schnabl, Gunther; Schobert, Franziska

doi:10.3790/aeq.62.3.187

Cited by 2 publications

(3 citation statements)

References 13 publications

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“…For a panel of emerging market economies, Klueh and Stella () find a negative relationship between central bank financial strength and inflation. Loeffler et al (), for a group of East Asian countries, and Adler et al (), for a set of 41 countries, show that central banks tend to set lower interest rates compared with a Taylor rule benchmark, when a central bank's losses erode its equity.…”

Section: Sources and Consequences Of Central Bank Lossesmentioning

confidence: 99%

“…If reserve requirements are remunerated below market rates, they may prevent an erosion of central bank profitability at the cost of financial disintermediation. While Sweidan () and Loeffler et al () analyze and discuss a central bank's incentives to substitute interest‐bearing liabilities with low‐remunerated central bank debt, such as reserve requirements, empirical evidence has to date been absent. This paper aims to fill this void.…”

Section: Sources and Consequences Of Central Bank Lossesmentioning

confidence: 99%

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Surplus liquidity, central bank losses and the use of reserve requirements in emerging markets

Hoffmann

Loeffler

2017

Rev International Economics

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Since the turn of the millennium, stocks of foreign reserves held by central banks in many emerging markets and developing countries have exceeded currency in circulation. To steer money market rates, these central banks have been absorbing liquidity from, rather than providing it to, the banking sector in their regular monetary policy operations. When interest rates in countries with major reserve currencies are low, the yield on foreign reserves is low. A higher interest rate on liquidity-absorbing operations may expose central banks to losses. Although a central bank is not a profit-maximizing institution, central bank losses can undermine the independence of the central bank. Using data for a large panel of central banks, this paper provides some evidence that central banks tend to apply low-remunerated reserve requirements when profitability is at stake.

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Section: Sources and Consequences Of Central Bank Lossesmentioning

confidence: 99%

Section: Sources and Consequences Of Central Bank Lossesmentioning

confidence: 99%

Surplus liquidity, central bank losses and the use of reserve requirements in emerging markets

Hoffmann

Loeffler

2017

Rev International Economics

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“…Korinek and Serven (2010) found that the motive could be welfare-improving if learning-by-investing externalities are established in the tradeable sector. On the other hand, Loffler et al (2016) analyzed the impact of capital inflow and its increasing pressures on the exchange rate. They concluded that monetary policy is independently restricted by the chosen exchange rate regime.…”

Section: Exchange Rate and Reserve Accumulationmentioning

confidence: 99%

Empirical Analysis of Trilemma in Emerging Economies

Akinkunmi¹

2017

Asian Development Policy Review

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Article History JEL Classification E58, F31The increasing debate on empirical evidences in testing the Mundell-Fleming theory has been the focus of this study. The study examines the effect of central banks" interventions on trilemma constraint using a panel dataset of 30 emerging market economies for the sample period 1980-2014. With the aid of the portfolio balance framework, the findings indicate that the weighted sum of the three trilemma objectives falls in the presence of foreign exchange market intervention. The capacity to loosen the constraints has decreased over time and has been most substantial in African emerging economies. Contribution/ Originality:This study contributes in the existing literature by testing the hypothesis of trilemma constraint in all emerging economies, using the most recent data. The paper contributes the first logical analysis of disaggregating the emerging markets. It documents that central banks do not have the capacity to loosen the trilemma trade-off.

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Limits of Monetary Policy Autonomy of East Asian Central Banks

Cited by 2 publications

References 13 publications

Surplus liquidity, central bank losses and the use of reserve requirements in emerging markets

Surplus liquidity, central bank losses and the use of reserve requirements in emerging markets

Empirical Analysis of Trilemma in Emerging Economies

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