Central Bank Balance Sheet and Real Business Cycles by Mustapha Akinkunmi

Author:Mustapha Akinkunmi
Language: eng
Format: epub
Publisher: De Gruyter
Published: 2018-03-11T16:00:00+00:00

6.4Asset-Side Composition and Economic Growth Nexus

6.4.1Asset-Growth Nexus before the 2007–2008 Crisis

As explained in the previous sections in terms of economic growth rate in the concerned countries, there were significant variations in the structure of central banks’ assets. For instance, 50 percent of ECB’s assets were made up of intra-Euro system claims while its counterparts, SNB and RSA, were mainly driven by foreign currency before 2007. In this period, investment for government pension fund accounted for the bulk of the Norges Bank.

In emerging countries like Mexico, South Africa, and Chile, their central banks’ assets mainly consisted of foreign reserves. In the case of South Africa, its assets were driven by both gold and foreign exchange. This might be a factor that triggered the improvements in those countries between 2005 and 2006 (see Figure 6.1). For instance, Chile’s central bank assets were 70 percent driven by the foreign assets before the financial crisis. This could be the reason why the country experienced the highest growth rate.

Figure 6.1: Pre-2007–2008 GDP Growth Rate

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