- Carlo Cottarelli
- Published Date:
- September 1993
Limiting Central Bank Credit to the Government Theory and Practice
INTERNATIONAL MONETARY FUND
© 1993 International Monetary Fund
Library of Congress Cataloging-in-Publication Data
Limiting central bank credit to the government : theory and practice / Carlo Cottarelli.
p. cm. — (Occasional paper, ISSN 0251-6365 ; 110)
Includes bibliographical references.
1. Banks and banking, Central. 2. Credit. 3. Bank loans. I. Title. II. Series: Occasional paper (International Monetary Fund) ; no. 110.
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- I. Introduction
- II. Inflation, Central Bank Independence, and Government Financing
- III. An Ideal Model
- The Maastricht Model: General Features
- All Credit Is Discretionary
- Only Indirect Credit Is Permitted
- Indirect Credit to the Government Is Unconstrained
- Parliament Is Not Directly Involved
- Government Deposits at the Central Bank Are Unconstrained
- Central Bank May Act as Government Fiscal Agent
- Summary of Recommendations
- IV. Formal Constraints in Practice
- Constraints on Direct Central Bank Credit and Financial Market Development
- Constraints on Indirect Central Bank Credit to the Government
- Circumventing Formal Constraints
- Foreign Exchange Borrowing and Central Bank Losses
- Formal Constraints and Macroeconomic Adjustment in Fund-Supported Programs
- Removing a Credit Facility at the Central Bank
- V. Conclusions
- I. Advantages of Borrowing from the Central Bank
- II. Relevance of Institutional Constraints
- III. Central Bank Credit to the Government in 57 Countries
- III. 1. Constraints on Central Bank Credit to the Government as Embodied in Maastricht TreatyIV. 3. Value of the Reference Percentage α
- I. A1. Does Central Bank Credit to the Government Reduce the Government Deficit More or Less than Central Bank Credit to the Private Sector?
- III. A2. Regulation of Central Bank Credit to the Government for Different Types of Credit
- IV.1. Gross and Net Central Bank Credit to the Government
The following symbols have been used throughout this paper:
… to indicate that data are not available;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
– between years or months (e.g., 1991-92 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 1991/92) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
This paper was prepared by Carlo Cottarelli, Senior Economist in the Monetary and Exchange Affairs Department. It was initiated when Mr. Cottarelli was a member of the Fiscal Affairs Department and has greatly benefited from comments from William Alexander, Tomás Baliño, Francesco Caramazza, Isaías Coelho, Daniel Eduardo Dueñas, Charles Enoch, Alain Ize, Alfred Kammer, Alexander Kyei, Pedro Martínez Méndez, Karim Nashashibi, Teresa Ter-Minassian, and the participants in seminars held at the Monetary and Exchange Affairs Department and at the Bank of Portugal; and from discussions with Patrick Downes, Curzio Giannini, and Manuel Guitián. The information presented in Appendix III has benefited from the cooperation of the relevant IMF country desks and of the central banks of many countries included in the sample. Elin Knotter of the External Relations Department edited the manuscript and coordinated production of the publication.
The views expressed in the paper, as well as any errors, are the sole responsibility of the author and should not be construed as those of the Executive Directors of the IMF or other members of the IMF staff.