Journal article
(Why) do central banks care about their profits?
- Abstract:
- 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.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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(Preview, Version of record, pdf, 1.1MB, Terms of use)
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- Publisher copy:
- 10.1111/jofi.13257
Authors
- Publisher:
- Wiley
- Journal:
- Journal of Finance More from this journal
- Volume:
- 78
- Issue:
- 5
- Pages:
- 2991-3045
- Publication date:
- 2023-06-22
- Acceptance date:
- 2021-12-13
- DOI:
- EISSN:
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1540-6261
- ISSN:
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0022-1082
- Language:
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English
- Keywords:
- Pubs id:
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1226814
- Local pid:
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pubs:1226814
- Deposit date:
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2021-12-22
Terms of use
- Copyright holder:
- Goncharov et al.
- Copyright date:
- 2023
- Rights statement:
- © 2023 The Authors. The Journal of Finance published by Wiley Periodicals LLC on behalf of American Finance Association. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
- Licence:
- CC Attribution (CC BY)
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