On 25 October 2021, Nigeria became the second country in the world, and the first in Africa, to launch a central bank digital currency. Launched with the tag line “Same Naira. More possibilities”, ...the Central Bank of Nigeria publicized the eNaira as having the capability to deepen financial inclusion, reduce the cost of financial transactions and support a more efficient payment system. However, more than one year after its launch, its usage is yet to gain a critical mass. This article identifies the significant challenges that make the eNaira unacceptable and potentially ineffective. First, its status as legal tender is questionable; secondly, it undermines privacy, a critical component of physical cash. Thirdly, it is incapable of wide acceptance by individuals and entities across Nigeria. The article explains each of these challenges and proposes a roadmap to the eNaira's acceptance and effectiveness.
The principle of financial independence recently recognized by the Court of Justice in the Banka Slovenije judgment requires that euro area central banks should be able to avail themselves with ...sufficient financial resources to carry out their tasks, as in situations in which central banks are financially dependent on the State to operate, the latter might impose conditions impairing the monetary policy objective. The Banka Slovenije judgment arrives within a context never faced before by the Eurosystem, that of several euro area central banks facing losses from the implementation of the monetary policy function. This novel situation, which is very likely to be prolonged over the next years, together with the articulation of the principle of financial independence by the Court of Justice, has an impact on the role of the State as a possible last resort provider of additional capital to the central bank, on the tools that central banks have in place to protect themselves against losses, and on the stability of accountability arrangements. This article assesses this impact and proposes a mechanism based on the reallocation of losses to the ECB which reinforces the financial independence of euro area central banks and streamlines accountability practices.
Who Borrows from the Lender of Last Resort? DRECHSLER, ITAMAR; DRECHSEL, THOMAS; MARQUES-IBANEZ, DAVID ...
The Journal of finance (New York),
October 2016, Letnik:
71, Številka:
5
Journal Article
Recenzirano
We analyze lender of last resort (LOLR) lending during the European sovereign debt crisis. Using a novel data set on all central bank lending and collateral, we show that weakly capitalized banks ...took out more LOLR loans and used riskier collateral than strongly capitalized banks. We also find that weakly capitalized banks used LOLR loans to buy risky assets such as distressed sovereign debt. This resulted in a reallocation of risky assets from strongly to weakly capitalized banks. Our findings cannot be explained by classical LOLR theory. Rather, they point to risk taking by banks, both independently and with the encouragement of governments, and highlight the benefit of unifying LOLR lending and bank supervision.
This article documents macroeconomic forecasting during the global financial crisis by two key central banks: the European Central Bank and the Federal Reserve Bank of New York. The article is the ...result of a collaborative effort between staff at the two institutions, allowing us to study the time-stamped forecasts as they were made throughout the crisis. The analysis does not exclusively focus on point forecast performance. It also examines methodological contributions, including how financial market data could have been incorporated into the forecasting process.
Abstract
Although the literature has studied the role of the Federal Reserve as the global lender of last resort in 2007–09, many aspects of the Dollar Swap Lines to the European Central Bank need ...further exploration. Accordingly, we provide original evidence about the auction operations, allotted amounts and interest rates with regard to the Federal Reserve’s dollar swaps and the European Central Bank’s dollar provision. More specifically, we examine the demand side of the Dollar Swap Lines (whereas the existing literature mentions the supply side only) and we scrutinise the interest rate (whereas the literature concentrates on volumes) set by the Federal Reserve, and also the rate set by the European Central Bank. Our findings cast light on the nature of the relationship between the Federal Reserve and the European Central Bank. Finally, we contribute to the literature on the global lender of last resort by coining the notion of the financial dilemma, under the dollar system within a framework of globalised financial markets.
Over the past two decades, the pace of central bank reforms in terms of institutional independence and transparency has been particularly brisk. This paper examines the current level of central bank ...independence (CBI) and transparency in a broad sample of countries using newly constructed measures, and looks at the evolution in both measures from an earlier time period. The legal independence of central banks has increased markedly since the 1980s, while the rise in transparency since the late 1990s has been less impressive. Exploiting the time dimension of our data to eliminate country fixed effects and using instrumental variable estimation to overcome endogeneity concerns, we present robust evidence that greater CBI is associated with lower inflation. We also find that enhanced transparency practices are associated with the private sector making greater use of information provided by the central bank.
The economic effects of the Covid-19 pandemic have placed a renewed strain on the economic governance of the European Union (EU). The European Central Bank (ECB) was a key player in the EU's response ...to the crisis induced by the pandemic. This paper adopts a theoretical approach focused on policy learning to explain how and why the ECB responded to the crisis in 2020-2021. By drawing on speeches, newspaper articles and interviews with policy-makers, the paper finds that the ECB was able to rely on earlier crisis experiences in the euro area in forming its response to the pandemic crisis. Although the sovereign debt crisis and the pandemic crisis had both similarities and differences from one another, the ECB was able to engage in inter-crisis and intra-crisis learning. Its learning concerned objectives, instruments as well as an awareness that timely and forceful response was crucial, so that the member states and other EU institutions had time to act.
This paper examines whether weak central bank finances affect inflation by scrutinizing the key rationale for such a relationship: that the absence of Treasury support makes central bank finances ...relevant for price stability. Specifically, I ask whether central banks which are not likely to enjoy fiscal support when needed experience higher inflation as their financial situation deteriorates. I find this to be true among a large sample of 82 countries between 1998 and 2008.
De facto
potential fiscal support appears relevant, while
de jure
fiscal support, which I survey analyzing 82 central bank laws, does not appear to matter. The results also bring forward an explanation for the conflicting results of the previous empirical studies, which neglected this key component.
The ECB and the Interbank Market Giannone, Domenico; Lenza, Michele; Pill, Huw ...
The Economic journal (London),
November 2012, Letnik:
122, Številka:
564
Journal Article
Recenzirano
Odprti dostop
We analyse the impact on the euro area economy of the ECB's non-standard monetary policy measures by studying the effect of the expansion of intermediation of interbank transactions across the ...central bank balance sheet. We exploit data drawn from the aggregated Monetary and Financial Institutions (MFI) balance sheet, which allow us to construct a measure of the 'policy shock' represented by the ECB's increasing role as a financial intermediary. We find small but significant effects on both loans and real economic activity.
The Euro Interbank Repo Market Mancini, Loriano; Ranaldo, Angelo; Wrampelmeyer, Jan
The Review of financial studies,
07/2016, Letnik:
29, Številka:
7
Journal Article
Recenzirano
The search for a market design that ensures stable bank funding is at the top of regulators' policy agenda. This paper empirically shows that the central counterparty (CCP)-based euro interbank repo ...market features this stability. Using a unique and comprehensive data set, we show that the market is resilient during crisis episodes and may even act as a shock absorber, in the sense that repo lending increases with risk, while spreads, maturities, and haircuts remain stable. Our comparison across different repo markets shows that anonymous CCP-based trading, safe collateral, and the absence of an unwind mechanism are the key characteristics to ensure market resilience.
PDF
