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(Why) do central banks care about their profits?

Goncharov, I., Ioannidou, V. ORCID: 0000-0002-7996-2346 & Schmalz, M. (2021). (Why) do central banks care about their profits?. The Journal of Finance,


We document that central banks are discontinuously more likely to report slightly positive profits than slightly negative profits, especially amid greater political pressure, the public’s receptiveness to more extreme political views, and when governors are reappointable. The propensity to report small profits over small losses is correlated with higher inflation and lower interest rates. We conclude that there are agency problems at central banks, which give rise to discontinuous profit incentives and are related to their policy choices and outcomes. These findings inform a debate about the political economy of central banking and central bank design.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Goncharov, I., Ioannidou, V. and Schmalz, M. (2021). (Why) do central banks care about their profits?. The Journal of Finance, which will be published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Publisher Keywords: Central Banks, Profitability, Non-Traditional Central Banking, Monetary Stability
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
[img] Text - Accepted Version
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