Responding to central bank collapse

Abstract

This note will focus on the impact of central bank collapse on managing exchange rates and credit lines which are critical for essential imports. It also notes other risks and potential responses when central bank functions are severely limited or not in place. It draws on the literature available following relevant challenges in a range of countries where central bank capacity is either very weak (post-conflict, following major balance of payment crisis) or effectively doesn’t exist. While this note seeks to give an overview of the challenges of a central bank collapse, it is also written bearing in mind the challenges faced in Yemen in March 2017. K4D helpdesk reports provide summaries of current research, evidence and lessons learned. This report was commissioned by the UK Department for International Development