Unconventional Monetary Policies and Central Bank Profits : Seigniorage as Fiscal Revenue in the Aftermath of the Global Financial Crisis

This study investigates the evolution of central bank profits as fiscal revenue (or: seigniorage)before and in the aftermath of the global financial crisis of 2008–9, focusing on a select group ofcentral banks—namely the Bank of England, the United States Federal Reserve System, theBank of Japan, the Swiss National Bank, the European Central Bank, and the Eurosystem(specifically Deutsche Bundesbank, Banca d'Italia, and Banco de España)—and the impact ofexperimental monetary policies on central bank profits, profit distributions, and financial buffers,and the outlook for these measures going forward as monetary policies are seeing their gradual“normalization.”Seigniorage exposes the connections between currency issuance and public finances, andbetween monetary and fiscal policies. Central banks' financial independence rests onseigniorage, and in normal times seigniorage largely derives from the note issue supplementedby “own” resources. Essentially, the central bank's income-earning assets represent fiscal wealth,a national treasure hoard that supports its central banking functionality. This analysis sheds newlight on the interdependencies between monetary and fiscal policies.Just as the size and composition of central bank balance sheets experienced huge changes in thecontext of experimental monetary policies, this study's findings also indicate significant changesregarding central banks' profits, profit distributions, and financial buffers in the aftermath of thecrisis, with considerable cross-country variation