Is Bank Supervision Central to Central Banking?

Recently, several central banks have lost their bank supervisory responsibilities, in part because it has not been shown that supervisory authority improves the conduct of monetary policy. This paper finds that confidential bank supervisory information could help the Board staff more accurately fore...

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Bibliographic Details
Published inThe Quarterly journal of economics Vol. 114; no. 2; pp. 629 - 653
Main Authors Peek, Joe, Rosengren, Eric S., Tootell, Geoffrey M. B.
Format Journal Article
LanguageEnglish
Published Cambridge, Mass. [etc.] MIT Press 01.05.1999
Oxford University Press
Published for Harvard University by the MIT Press
Subjects
Bank assets
Bank management
Banking policy
Banking regulation
CAMELS bank rating system
Central banks
Coefficients
Economic forecasting
Federal Reserve Bank
Federal Reserve monetary policy
Macroeconomics
Management
Monetary policy
Probability forecasts
Studies
United States > US
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Summary:Recently, several central banks have lost their bank supervisory responsibilities, in part because it has not been shown that supervisory authority improves the conduct of monetary policy. This paper finds that confidential bank supervisory information could help the Board staff more accurately forecast important macroeconomic variables and is used by FOMC members to guide monetary policy. These findings suggest that the complementarity between supervisory responsibilities and monetary policy should be an important consideration when evaluating the structure of the central bank.
Bibliography:ark:/67375/HXZ-9VZ1D9GW-6
Valuable research assistance was provided by Faith Kasirye-Nsereko, Rokeya Khan, and Jonathon Willis. We thank Olivier Blanchard, Lynn Browne, Jeffrey Fuhrer, John Jordan, Richard Kopeke, Alexander Vamosi, and an anonymous referee for helpful comments. The views expressed are those of the authors, and do not necessarily reflect official positions of the Federal Reserve Bank of Boston or the Federal Reserve System.
istex:0F2514E5A78FAE224E91751A03BD6CD91EAD0067
ISSN:0033-5533
1531-4650
DOI:10.1162/003355399556098