Central Banks Use of Derivatives and Other Contingent Liabilities: Analytical Issues and Policy Implications

By Liliana B Schumacher, Mario I. Bléjer

March 1, 2000

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Liliana B Schumacher, and Mario I. Bléjer Central Banks Use of Derivatives and Other Contingent Liabilities: Analytical Issues and Policy Implications, (USA: International Monetary Fund, 2000) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Whereas some central bank derivatives and other contingent liabilities arise from anomalous circumstances, there are a number of positive reasons that explain their popularity. After analyzing the rationale for these operations, we stress that most of these operations, being off-balance sheet, increase the risk and reduce the transparency of central bank accounts. This in turn makes more difficult the assessment of the financial position of the monetary authority and, by implication, of the macroeconomic conditions of the country. To deal with this issue, we suggest a comprehensive portfolio approach that values, in an economic sense, all assets and liabilities of the central bank.

Subject: Banking, Contingent liabilities, Currency markets, Deposit insurance, International reserves

Keywords: Central bank, Forward contract, Market, Value, WP

Publication Details

Pages:

17
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/066
Stock No:

WPIEA0662000
ISBN:

9781451848786
ISSN:

1018-5941

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