Central Bank Equity as an Instrument of Monetary Policy

  • Mojmir Hampl
  • Tomas HavranekEmail author


We examine the use of central bank equity as an unconventional monetary policy tool. In this setting, a central bank employs digital currency to transfer digital cash to each household, thus supporting consumption directly when needed. The asset side of the central bank’s balance sheet remains unchanged, and the creation of new digital cash is offset by a decrease in central bank equity. The central bank thus incurs an immediate loss but does not take on any additional risks for its future income statements. We address several objections to this policy, paying particular attention to the claim that weakening the financial strength of the central bank endangers long-term price stability. Through a meta-analysis of 176 estimates reported previously in the literature, we find that central bank financial strength has not historically correlated with inflation performance.


Central bank equity Inflation Seigniorage Monetary policy Helicopter money Central bank digital currency 

JEL Classification

E42 E52 E58 



This research was conducted when Hampl was Vice-Governor of the Czech National Bank, and both authors gratefully acknowledge the support from the Bank (though the views expressed here are not necessarily those of the Bank). Havranek also acknowledges support from the Czech Science Foundation (Project 18-02513S) and Charles University (Project Primus/17/HUM/16). We thank Volha Audzei, Vit Barta, Vojtech Benda, Oldrich Dedek, Michal Franta, Tomas Holub, Nikolaos Kyriazis, Jiri Schwarz, and participants of a Czech National Bank seminar for useful comments, and a referee of Comparative Economic Studies for an exceptionally detailed report.


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Copyright information

© Association for Comparative Economic Studies 2019

Authors and Affiliations

  1. 1.LSE Systemic Risk CenterLondonUK
  2. 2.Faculty of Management and EconomicsTomas Bata UniversityZlinCzech Republic
  3. 3.Czech National BankPragueCzech Republic
  4. 4.Faculty of Social SciencesCharles UniversityPragueCzech Republic

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