Assets and Liabilities Management for Central Banks

Abstract

For a central bank to fulfill its key role in maintaining price stability and to fulfill its policy functions in the field of financial stability it is paramount to have a good measure of financial independence, giving it credibility as a critical partner in political decision-making. The current financial turmoil shows the importance of a strong central bank being able to take emergency measures when necessary to enhance financial stability and the smooth functioning of money markets. To achieve these public tasks it is desirable to hold a sustainable capital buffer.

The author wishes to thank Carsten Folkertsma, Tessa Wouters and Eloy Lindeijer for their useful contributions. Views expressed are those of the author and do not necessarily reflect official positions of the Nederlandsche Bank.