ABSTRACT

INTRODUCTION This chapter reviews the fiscal activities that governments have imposed on their central banks in a sample of 26 developing countries. In the main, these activities fall under five categories: (1) seigniorage; (2) financial restriction; (3) selective credit policies; (4) foreign exchange operations at nonmarket-clearing prices; and (5) implicit or explicit deposit insurance at subsidized rates and recapitalization of insolvent financial institutions. Not all central banks engage in all these activities, but some central banks perform additional fiscal activities such as collecting taxes and running food procurement programs.