Linking financial soundness and independence of central banks—Central and Eastern Europe, Turkey and CIS countries

Abstract

Two prominent cases of quasi-fiscal operations, sterilized interventions and the accumulation of junk assets due to indirect financing of the government, can impair the financial soundness of central banks and thereby also independence. This is analyzed for selected central banks in Central and Eastern Europe and the CIS countries and for Turkey. The article concludes that sterilization costs tend to be more important in new EU member countries, whereas junk assets play a more vital role on central banks’ balance sheet in Turkey and in some CIS countries.