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Public Liquidity Demand and Central Bank Independence

Author

Listed:
  • Jean Barthélemy
  • Eric Mengus
  • Guillaume Plantin
Abstract
This paper studies how private demand for public liquidity affects the independence of a central bank vis-à-vis the fiscal authority. Whereas supplying liquidity to the private sector creates degrees of freedom for fiscal and monetary authorities vis-à-vis each other, we show that the authority that is most able to attract private liquidity demand can ultimately impose its views to the other.

Suggested Citation

  • Jean Barthélemy & Eric Mengus & Guillaume Plantin, 2020. "Public Liquidity Demand and Central Bank Independence," Working papers 747, Banque de France.
    • Handle: RePEc:bfr:banfra:747
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Barthélemy, Jean & Mengus, Eric & Plantin, Guillaume, 2024. "The central bank, the treasury, or the market: Which one determines the price level?," Journal of Economic Theory, Elsevier, vol. 220(C).
    2. Jean Barthélemy & Guillaume Plantin, 2018. "Fiscal and Monetary Regimes: A Strategic Approach," Working Papers hal-03393134, HAL.
    3. Debrun, Xavier & Masuch, Klaus & Ferrero, Guiseppe & Vansteenkiste, Isabel & Ferdinandusse, Marien & von Thadden, Leopold & Hauptmeier, Sebastian & Alloza, Mario & Derouen, Chloé & Bańkowski, Krzyszto, 2021. "Monetary-fiscal policy interactions in the euro area," Occasional Paper Series 273, European Central Bank.
    4. Fernando M. Martin, 2020. "Fiscal Dominance," Working Papers 2020-040, Federal Reserve Bank of St. Louis, revised 26 Aug 2023.
    5. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

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    More about this item

    Keywords

    : Central Bank Independence; Low Rates; Game of Chicken; Demand for Liquidity.;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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