This paper analyses empirically if there is a link from central bank finances to inflation. There is no consensus on this issue in the academic literature. On the one hand, there are papers arguing that a central bank’s financial weakness can lead to “policy insolvency”. On the other hand, some authors argue that central bank financial strength is just one of many features of the monetary policy institutional set-up, and that its link to inflation is far from straightforward. In terms of country case studies, one can find examples in both directions, too. There are historical examples of countries.
