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 of central banks, namely: the Bank of England, United States Federal Reserve System, Bank of Japan, Swiss National Bank, European Central Bank and the Eurosystem (specifically: Deutsche Bundesbank, Banca d'Italia, and Banco de España), we research the impact of experimental 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, and between monetary and fiscal policies. Central banks' financial independence rests on seigniorage, and in normal times seigniorage largely derives from the note issue supplemented by "own" resources. Essentially, the central bank's income-earning assets represent fiscal wealth, a national treasure hoard that supports its central banking functionality. The analysis sheds new light on the interdependencies between monetary and fiscal policies. Just as the size and composition of central bank balance sheets experienced huge changes in the context of experimental monetary policies, the study's findings also indicate significant changes regarding central banks' profits, profit distributions, and financial buffers in the aftermath of the crisis, with considerable cross-country variation.