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Central Bank Profit Distribution As A Monetary Policy Tool

Hiermeyer, Martin (2020): Central Bank Profit Distribution As A Monetary Policy Tool.

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Abstract

Next to conventional and unconventional monetary policy, there may be another form of monetary policy: Central bank profit distribution to the government. By distributing a higher profit than normal if inflation is below target, and a lower profit than normal if inflation is above target, central bankers may achieve their inflation target better. To guard against excessive inflation, lawmakers might stipulate that central bankers can only distribute higher profits than nor-mal if conventional monetary policy is exhausted (0% policy rate).

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