Book contents
- Central Banks as Fiscal Players
- Federico Caffè Lectures
- Central Banks as Fiscal Players
- Copyright page
- Dedication
- Contents
- Figures
- Tables
- Introduction
- 1 The Central Bank Balance Sheet: Why It Matters
- Appendix to Chapter 1: Stochastic Discount Factors
- 2 A Stylized Set of Accounts for the Treasury, the Central Bank and the State
- 3 Helicopter Money Drops
- 4 The Fallacy of the Fiscal Theory of the Price Level – and Why It Matters
- Appendix to Chapter 4: A Formal Approach to the FTPL
- 5 Life at the Zero Lower Bound and How to Escape from It
- 6 Why the Eurosystem Isn’t a Proper Central Bank – and How to Make It One
- References
- Index
2 - A Stylized Set of Accounts for the Treasury, the Central Bank and the State
Published online by Cambridge University Press: 02 November 2020
- Central Banks as Fiscal Players
- Federico Caffè Lectures
- Central Banks as Fiscal Players
- Copyright page
- Dedication
- Contents
- Figures
- Tables
- Introduction
- 1 The Central Bank Balance Sheet: Why It Matters
- Appendix to Chapter 1: Stochastic Discount Factors
- 2 A Stylized Set of Accounts for the Treasury, the Central Bank and the State
- 3 Helicopter Money Drops
- 4 The Fallacy of the Fiscal Theory of the Price Level – and Why It Matters
- Appendix to Chapter 4: A Formal Approach to the FTPL
- 5 Life at the Zero Lower Bound and How to Escape from It
- 6 Why the Eurosystem Isn’t a Proper Central Bank – and How to Make It One
- References
- Index
Summary
Chapter 2 derives the comprehensive balances sheet (or intertemporal budget constraint of the central bank and the Treasury (or general government) and of the consolidated State and contrasts these with the conventional balance sheets. We then consider, theoretically and quantitatively, the arithmetic of fiscal sustainability by focusing on the net non-monetary debt of the consolidated general government and central bank and the seigniorage-augmented primary surplus of the State. The fact that Japan’s general government gross debt was 237.6 percent of GDP at the end of 2017 while the net nonmonetary debt of the consolidated State was only 67.4 percent of GDP underlines the importance of our approach. Japan does not yet have a serious debt stock problem. It has a bit of a flow deficit problem: its general government cyclically adjusted primary budget deficit was 3.8 percent of GDP in 2017. But because it is at the ELB and has been for years, it can extract massive seigniorage – more than 10 percent of GDP each year in the five years leading up to 2017. That suggests that, if Japan ever were to escape the ELB, it could have both a stock and a flow monetary overhang problem.
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- Information
- Central Banks as Fiscal PlayersThe Drivers of Fiscal and Monetary Policy Space, pp. 36 - 72Publisher: Cambridge University PressPrint publication year: 2020