Financial Situation of Central Banks and its Broader Policy Implications
Financial Situation of Central Banks and its Broader Policy Implications

Summary/Abstract: This article explores the consequences (or potential consequences) of an unfavourable financialsituation of a central bank, i.e. losses that could lead to the appearance of negative capital. Sucha situation is not irrelevant or neutral for an economy. The aim of the article is to identify the linksthrough which the unfavourable financial situation of a central bank (losses, negative capital)affects various components of the economic policy of the state. We adopt two perspectives – firstly,a more aggregated perspective, wherein we simulate the impact of changes in key interest rates onthe financial situation of central banks and the implications of these changes for transfers to thestate budget; secondly, a more disaggregated perspective, wherein we identify three groups of con-sequences of the situation: 1) monetary, 2) fiscal, and 3) related to the independence of the centralbank and potentially other dimensions of economic policy.

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