Independence and Accountability of Central Banks With a Special Focus on India

According to the consensus view, central banks reached a high level of independence by the end of last century. This paper argues that as a result short-term political considerations applied during the appointment process of central bank decision-makers, their actual independence was at a lower level already that time. The global f＇mancial crisis created new tasks for central banks and forced a review of the meaning of independence. The paper argues that central banks should be responsible for safeguarding fmancial stability and their macro-prudential activity can only be executed in cooperation with governments. However, interest rate policy decisions must remain free of political influence. The novelty of this paper lies in showing the conflictual relationship of the various roles of central banks. The paper concludes that the duality of independence and cooperation represents a major uncertainty in the operation of central banks. As a result of the greater degree of politicisation of the activities of central banks, their de facto independence in interest rate policy making may further shrink in the future. The paper also shows that India represents a unique case of central bank independence. In most countries, de jure independence is higher than de facto. India is one of the very rare countries where the reverse is the case.

The Threat of Financial Sanctions:What Safeguards Can Central Banks Build?

The sanctions imposed by the G10 countries on financial institutions in Russia,including on its central bank,mil come under scrutiny by emerging market central banks.This will help them build appropriate safeguards against disruptions to cross-border transactions and revise their investment mandates to reduce the risk of reserve asset freezes.Building new1 financial market infrastructure and cross-border payment systems,or strengthening existing ones,will become the priority of emerging global powers.The goal will be to build systems that support democratic governance mechanisms,have oversight arrangements involving the central banks of trusted countries,and promote fair and safe access to clearing and settlement under well-defined policy guidelines.The use of alternatives to the US dollar as the invoicing currency in international trade will gather momentum.Markets for energy and other commodities will be the change drivers.China has an important role to play.

Central bank digital currency,loan supply,and bank failure risk:a microeconomic approach

Central bank digital currencies(CBDCs),which are legal tenders in digital form,are expected to reduce currency issuance and circulation costs and broaden the scope of monetary policy.In addition,these currencies may also reduce consumers’need for conventional demand deposits,which,in turn,increases banks’loan provision costs because deposits require higher rates of return.We use a microeconomic banking model to investigate the effects of introducing an economy-wide,account-type CBDC on a bank’s loan supply and its failure risk.Given that a CBDC is expected to lower the cost of liquidity circulation and become a strong substitute for demand deposits,both the loan supply and the bank failure risk increase.These increases are countered by subsequent increases in the rates of return on term deposits and loans,which,in turn,reduce the loan supply and thus bank failure risk.These offsetting forces lead to no significant change in banking,as long as the rate of return on loans is below a certain threshold.However,once the rate is above the threshold,bank failure risk increases,thereby undermining banking stability.The problem is more pronounced when the degree of pass-through of funding costs to the loan rate is high and the profitability of a successful project is low.Our results imply that central banks wishing to introduce an economy-wide,account-type CBDC should first monitor yields on bank loans and consider policy measures that induce banks to maintain adequate liquidity reserve levels.

The Digital Currency of China’s Central Bank:Digital Currency Electronic Payment(DCEP)

DCEP is the Chinese version of Central Bank Digital Currency(CBDC).It is the only legal digital currency in China and meets four conditions:(a)it is issued by the central bank;(b)it is digitized;(c)it is account and wallet based;(d)it is oriented towards the general public.As a retail central bank digital currency,it has three main technical features:a“tiered limit arrangement”(small-scale payments can be made anonymously while large-scale payments cannot),a“two-tier operating system”(as with the central bank-commercial bank traditional model),and a“dual offline payment system”(supporting both parties of the transaction).Compared with CBDCs in other countries,China’s DCEP has smaller economic impacts,more obscure strategic goals,and more scarce technical details.But its progress in testing is ahead of central banks of other countries.This article is based on public information and is intended to explain what DCEP is and why and how it was developed.It also offers suggestions for future research.

Central Bank Interest Rate Policy as a Pro-Crisis Instrument of Macroeconomic Regulation

Why does interest rate policy not work in the economy as economic theory suggests?To understand why,you need to look at the economy from a higher level of abstraction.With this approach,only two states of the economy can be distinguished.The first is a“normal”state;the second is crisis and recession.The“normal”state is the period after the recession and before the next crisis.During this period,the basic laws of the market economy work.During a crisis,the relationship between the level of interest rates and borrowing by households and businesses is broken.This explains the ineffectiveness of the policy of lowering interest rates.Different states of the economy have their own laws,and you cannot extrapolate tools that are successful under“normal”market conditions linearly to the crisis state of the economy.Why does the interest rate policy during the period of the“normal”state of the economy not adjust its development in order to prevent the onset of the crisis?Firstly,the conditions for the emergence of crisis phenomena are created by the interest rate policy at the very beginning of the business cycle,when central banks set and maintain low interest rates for a relatively long period.Secondly,by the end of the business cycle,the credit burden in economy reaches its maximum,so there is no further possibility of expanding effective demand by decreasing interest rates.Thirdly,interest rate policy is an instrument for rough adjustment of the economy,indiscriminately affecting all participants in economic relations.In an attempt to stimulate the economy,the central bank creates the conditions for increasing its imbalance.Fourth,at the end of the business cycle,the interest rate policy does not actually support the real economy,but only the stock market.Fifth,the Fed’s policy has formed a pro-crisis conditioned reflex among market participants.Thus,central banks should leave the determination of the level of interest rates to the free market.

从监管视角分析中央银行数字货币与私人加密货币的竞争均衡

This paper constructs a searching model to study the impact of monetary policy,fiscal policy,transaction costs of private cryptocurrency and regulatory uncertainty on the competitive equilibrium between Central Bank Digital Currency and private cryptocurrency.The results show:(1)Central Bank Digital Currency and private crypto-currency can conditionally coexist.(2)The level of economic welfare is related to monetary policy and fiscal policy but independent from the issuance and transaction of private cryptocurrency.(3)Under complete competition of private cryptocurrency mining,the mining cost becomes deadweight loss for whole society.

Golden Quantity Theory： Against Monetarist School

This paper proposes a new perspective on quantity theory of economics. Historically, golden and silver were money, especially in Greek civilizations. Golden money standard existed during 19th century, and banknote system started in 20th century with quantity theory of Irving Fisher. Accordingly, central bank possesses banknotes in markets, which equals to total GDP （emission）. This paper suggests golden quantity. In modem economy, there is IMF. It manages global monetary. Golden quantity theory is the policy that may be applied in economic crises. Accordingly, central bank prints golden, and prints banknote aligned with golden amount. That policy may increase emissions in markets, and increase total demand.

Monetary Stability and Crisis Predictions Fallacies

In present days,our instable financial markets,characterized by heavier growing monetary responsibilities,are delivering and enlarging ever growing central banks’functions.The financial stability applied standards have been creating contradictory results in the recent Great Recessions since the year 1987 up to the central banks model,after the 2008 last financial crisis,with major central banks as the FED and the CEB(Diamond,2007,pp.189-200)conflicting main operative areas,monetary and financial goals with unexpected results.We have been living a very difficult and dramatic period,which suggests a lot of reconsiderations about what the monetary policy means and may pursue and in which area,with respect to the financial system restrictions,in particular,during the post-second World War,based initially on the pseudo gold dollar parity,things were relatively stable and major financial crises were happening in emerging peripheral markets only.Financial stability was ever relevant,but it was not something to which governments devoted institutional attention.Based on what happened during the recent crisis,it is now of capital responsibility connecting monetary and economic financial stability jointly.Central banks,on the contrary,seem not able to pursue both functions relying on classical market tools.Up to now,the only obligation,imposed to a central bank as a private agent,has been taking care of monetary stability,to contain inflation rates over upper limits,assumed in entering definitely in the legal tender monetary,regime almost everywhere over the planet.Originally,for specific monetary policy purposes alone,between central banks and possible financial entities,there were no guidelines or structural determined controls,only institutional and statutory single bank’s operational clauses.There were no legal constraints such as formal loan to-value,or loan to cash-flows,or formal capital level limits,based on actual constraints.Free repurchase agreements and sales or purchases of securities(the most relevant tools of monetary policy guidelines),generally based on private financial covenants,were the sole most recurrent tactical interferences in adjusting the economic free activity.The assuming statutory thresholds were casual in the incorporating state,central banks used to monitor the activities of agents through economic incentives,rather than mandating and monitoring specific legal prescriptions.The evolving inconsistency of both activities has become even more manifest;two conditions should be fulfilled simultaneously:To avoid dilemmas in which a central bank might be called to make the autonomous independent management choice between monetary price stability,pursuing at same time,generally incompatible,financial stability,two different policies should be rarely jointly assigned to same bodies,especially central banks.As regards the first issue,the IMF nevertheless,with Brunnermeier and Sannikov(Brunnermeier&Sannikov,2012),has argued that price stability and financial stability are interlinked Short-term debt financing played an important role in the run-up to the financial crisis,as increases in leverage helped boost growth but also made the economy more susceptible to a downturn.Since the recession,private agents have reduced their debt level while many governments have increased borrowing.This deleveraging process appears to be holding back the recovery,and the Japanese experience suggests that such deleveraging can continue over an extended period”,unless in the long run we are all broken at state level,as history seems now to prove.It is true indeed,as reminded by Lamfalussy(Lamfalussy et al.,2010,pp.7-9),and now widely proved by facts,that prices and the growth-employment objectives,run into each other because it is seldom the case that the pursuit of one is consistent with the pursuit of the second in global economies.

What Happened to Jacques Rueff and Robert Triffin?

A present monetary theory of the Great Depression has been explained as stemming from Milton Friedman,ignoring the previous Davanzati,a Florentine finding,in the 16th Century,an explanation solution to the increase of prices due to the arrival of Spanish silver from the New World.Designed to counter the Keynesian notion that the Depression resulted from instability theories,characterizing most modern capitalistic economies,Friedmans explanation identified lately the monetary trend as a disordered monetary policy,carried out by erroneous Federal Reserve Board interventions,possible after the Aldrich-Vreeland innovations,introducing Treasury money in the year 1908.More recent works about the Great Depression reconsider the attempts to restore the international gold standard,suppressed on the brink of World War I.We learnt that current views of the Depression,as analyzed in the 1920s by Ralph Hawtrey and Gustav Cassel,while recommending a gold standard reset,reflect that such standard risk deflations,unless the resulting increase in the international monetary demand linked to physical gold,could be satisfied.Although their early warnings of potential disaster became actual and their policy advice was consistently correct,their contributions were ignored and forgotten.The vanishing of their comments was firstly outlined not a long time ago,by Batchelder and Glasner What Ever Happened to Hawtrey and Cassel? (2013)This paper explores the possible reasons for the remarkable historical disregard of the Hawtrey-Cassel monetary explanation of the Great Depression,even by Nobel Prize winner Robert Mundell in his 2000 historical Nobel reconsideration of the monetary 20th century(Mundell,2000).The paper stresses the identical historical conditions surfacing after the Bretton Woods agreements.Robert Triffin and Jacques Rueff comment likely warnings as in the first Great Depression,under the monetary policy illusion and the Central Banks excessive disregard of the basics of the quantitative theory on the long run,mostly ignored.Robert Triffin started to address the problem in March and June of 1959,Italian Banca Nazionale del Lavoro Quarterly Review.The first of these articles(Part One:Diagnosis)explains in the simplest possible terms,the extraordinary success of the nineteenth century system of international gold based convertibility,and the calamitous collapse of the late 1920s attempts to bring it back to life.It may hold for us today an indication of the main efforts facing the similar attempt at reconstructing the past expressed some 64 years later,after the first of August 1914,by Triffin during the 1978 Christmas weekend.To deal with them in simple,commonsense terms would inevitably classify the author as an unrealistic whose views deserve no more than a raising of eyebrows.Jacques Rueff,with his The Monetary Sin of the West,a logical consequence of the Triffin previous notes of the 1960s,went straight to the consequences of the Camp David resolutions of President Nixon who just temporarily asked his Treasury Secretary,John Conally to suspend the gold convertibility.There were two changes in United States(U.S.)government policy toward the monetary role of gold in the last 100 years.The first was in 1933-1934;all holdings of gold were confiscated in March 1933.Then,the U.S.Treasury adopted a parity for the U.S.dollar of$35.00 an ounce at the end of January 1934.Gold production surged,the private demand for gold fell,and the U.S.experienced large increases in foreign demand for U.S.dollar securities.In those years there was a massive flow of gold to the U.S.The second historical change in U.S.gold policy followed the meeting at Camp David on August the 15th 1971,when the U.S.Treasury closed its gold window fearing a run on its gold holdings,declining towards$10 billion.Some U.S.officials sought to diminish the monetary role of gold.The anticipation of some U.S.officials attending Camp David was that the persistent U.S.payments problem would disappear,once foreign currencies had no parities in terms of the U.S.dollar.The prices of these foreign currencies would increase and the U.S.trade surplus would become larger.Instead,many foreign Central Banks became larger buyers of dollarssecurities,which led to a higher price of the U.S.dollar and a U.S.trade structural deficit.The U.S.international investment position morphed from the worlds largest creditor country,to the worlds present day largest debtor.

Consumer choices under new payment methods

This study suggests a payment portfolio model that includes new payment methods that have emerged from the development of cryptocurrency markets and central bank digital currencies(CBDCs).Our model analyzes the optimal payment choice for consumers under various macroeconomic conditions.We determine that an individual economic agent chooses payment methods under specific conditions by incorporating policy interest rates on CBDCs and stablecoins used on cryptocurrency exchanges.We analyze the impacts of CBDCs and stablecoins on the choice of whether to use cash or deposits.We also examine how the agent changes her portfolio compositions in response to exogenous macroeconomic policies.If a government replaces cash with a CBDC,the convenience of digital currency would not affect consumer choices.The higher the government’s interest rate on CBDCs,the more consumers will use CBDCs than deposits.

Forecasting investment and consumption behavior of economic agents through dynamic computable general equilibrium model

Much research has been devoted to examination of the financial easing policy of the European Central Bank(ECB).However,this study is one of the first to use a dynamic micro-founded model to investigate empirically the impact of the ECB’s Quantitative Easing(QE)policy on consumption and investment by economic agents in Italy(households,government,firms,and the rest of the world).For this purpose,we constructed a Financial Social Accounting Matrix(FSAM)for the Italian economy for the year 2009 to calibrate a dynamic computable general equilibrium model(DCGE).This model allowed us to evaluate the direct and indirect impact of money flow on the behavior of consumption and investment.The findings of the study confirmed the positive impact of the ECB’s monetary policy on the level of investment and consumption.

New Version of IS-LM:Neoclassical Monetarism

This study argues three policies for economies.The aim of those policies is to increase total demand by money supply.Global economy currently faces lack of money in markets and recession effect.First,neomerchantalism is to use national currency in bilateral trade.Second,limited money supply is to supply money to sub-regions of economy.Third,neoclassical monetary uses channels in monetary supply.Channels in NCM policy are financial banks and firms.Financial banks and firms distribute money into business markets.Global economies may apply propositions of NCM currently to refresh economies with money.

Perceptions on the Effects of Auditor-Client Relationship upon Audit Quality and Auditor Independence： Evidence from Bahrain

The study aims to focus upon the association between the auditors and companies by indicating how this association affects the quality of audit and auditor independence in a developing country （the case of Bahrain）. To achieve these objectives, a questionnaire was developed and distributed to respondents from audit firms in Bahrain. Descriptive statistics were used to analyse the influence of auditor-client association upon quality of audit and auditor independence and how audit quality and auditor independence are improved was also explored in the study. The results show that all the questions （1-8） in the questionnaire impair both audit quality and auditor independence with the means ranging from 3.6000 to 4.0364 with an average mean of 3.7212. According to the measurement scale, any item with a mean of 3.50 or more is acceptable, and since all the influences are above 3.50, they are all acceptable. Regarding how auditor-client relationship （or long tenured auditor） would improve both quality of audit and auditor independence, the results show that all the questions （9-17） would improve both audit quality and auditor independence with the means ranging from 3.6364 to 4.0727 with an average of 3.8646, which are acceptable. These results confirm statistically that there is a significant relationship between the auditor long-term tenure and audit quality and auditor independence, so the null hypothesis （H0） is rejected and the alternative hypothesis is accepted. Simple regression analysis is employed to test the hypothesis of the study and its significance. The results show that （H0） hypothesis is not significant. Therefore, the alternative hypothesis （H1） is significant at p 〈 0.005, which means that there are differences in viewpoints among respondents and the p-value obtained is 0.044 which is less than the significant value of p 〈 0.05. These results confirm the hypothesis that a significant relationship exists between the auditor long-term tenure and quality of audit and auditor independence.

Effects of Mandatory Audit Firm Rotation Upon Quality of Audit： The Perception of Audit Firms Evidence From Bahrain

The objectives of this study are： （1） to explore current audit appointment practices by audit firms in Bahrain; （2） to look into the opinions of audit firms in Bahrain on potential effects provided by implementing mandatory audit firm rotation （audit quality）; and （3） to investigate audit firms＇ views in implementing mandatory audit firm rotation in Bahrain. To achieve these objectives, a questionnaire was developed and distributed to respondents that consist of all auditors working in audit firms in Bahrain. The findings indicated that there is a significant relationship between mandatory audit firm rotation and quality of audit. The study also indicated that longer partner tenure makes the auditor＇s performance lack the quality in the auditing process. The average mean for all questions of the hypothesis together is 2.73 with average standard deviation of 0.94 which is less than half of the mean. This means that there is no dispersion among respondents about the questions of the hypothesis. Also, the analysis shows that the t-value is 29.922, which is greater than the table critical value of t （1.66）, and the p-value obtained is 0.000 which is less than the value of significance at p 〈 0.05. These results confirm statistically that there is a significant relationship, so the null hypothesis is rejected and the alternative hypothesis is accepted.

Multiple Exchange Theory: Need to Change IMF System

This study discusses global golden map to handle global liquidity gap.Further,it discusses 3rd Central Bank to effectively apply golden policy.Reason for applying golden policy is based on IMF system.IMF system is based on golden-dollar relations.However,that system is not run enough effectively due to multiple parity and multiple exchange system in global economy.In order to effectively apply multiple parity and multiple exchange system,it needs 3rd Central Bank,it is Asia Central Bank.Otherwise,global economy might go to severe liquidity problem and gap that may create conditions severe than 1929 Case.

The Effects of FED’s and ECB’s QE Announcements on Exchange Rates of Bitcoin,Euro,and Dollar in the Period of COVID-19:An Event Study Approach

Corresponding to the pandemic COVID-19,both FED and ECB were committed to using their full range of tools,such as the helicopter money policy and a new quantitative easing programme to support the economy in this challenging time.The goal of this study is to explore the impact of ECB’s and FED’s COVID-19 Quantitative Easing(QE)announcements on exchange rates.Using an event study with daily data from 01/10/2019 to 02/05/2020,it investigates the impact of these“Odyssean shocks”on EUR/USD,BTC/EUR,and BTC/USD.The empirical results show an unexpected behavior of exchange rates in response to monetary policy actions.More specifically,the ECB’s announcement led to appreciation of the Euro against the Dollar.On the other hand,the FED’s announcement leads to depreciation of the Euro.The virtual exchange rates of Bitcoin do not seem to be affected by the announcements of the ECB and the FED,confirming the role of Bitcoin as a decentralised currency and independent of Central Banks and governments.The conclusions of the study are useful for investors and policy makers,as the unforeseen COVID-19 crisis has disturbed and modified investor behavior.

Economic uncertainty,central bank digital currency,and negative interest rate policy

The covID-19 outbreak has brought unprecedented social attention to economic uncertainty and negative interest rate policy(NIRP).How does uncertainty affect economic activity,and how effective is a NIRP based on central bank digital currency(CBDC)?To answer the two questions,we constructed a dynamic stochastic general equilibrium(DSGE)model that accommodates sticky prices and wages.The results indicated:(i)Economic uncertainty has substantially reduced investment,output,wage,and loans,which increases unemployment risk.In the short term,it has triggered impulsive consumption by households,while consumption has fallen into a slump in the long run.(ii)After suffering an uncertainty shock,the economy entered short-term stagflation and long-term deflation.The short-term stagflation was mainly caused by resident wage adjustment,and the long-term deflation was due to the decline in effective demand caused by unemployment risk.(ii)CBDC could eliminate the zero lower bound(ZLB)constraint,thereby improving the effectiveness of NIRP.Compared with traditional currency,CBDCbased NIRP could more effectively smooth macroeconomic fluctuations and alleviate the negative impact of an uncertainty shock,which is more conducive to restoring market confidence and promoting economic recovery.

China's Central Bank Issues Additional Rule on QFII Custodianship

China’s central bank issued an additional regulation recently concerning the Qualified Foreign Institutional Investor (QFH) scheme, clarifying key procedural matters when banks apply for a custodian’s role.The government has unveiled the long-awaited reform in the early Nov. 2002, allowing foreigners through such QFHs to trade its A. shares and bonds. Six banks, including three Chinese and three foreign ones, have already applied to