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7 - Central Bank

Central Bank is responsible for overseeing the monetary system of a nation. It has responsibilities like monetary policy, currency stability, low inflation, and full employment. Central banks issue currency, function as the bank of the government, regulate credit, oversee commercial banks, and manage exchange reserves. They manage the money supply, interest rates, and serve as the lender of last resort during financial crises. Central banks also have supervisory powers over financial institutions to prevent reckless behavior. Their key goals are price stability, a stable real economy with high employment and growth, and financial stability.

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0% found this document useful (0 votes)
46 views11 pages

7 - Central Bank

Central Bank is responsible for overseeing the monetary system of a nation. It has responsibilities like monetary policy, currency stability, low inflation, and full employment. Central banks issue currency, function as the bank of the government, regulate credit, oversee commercial banks, and manage exchange reserves. They manage the money supply, interest rates, and serve as the lender of last resort during financial crises. Central banks also have supervisory powers over financial institutions to prevent reckless behavior. Their key goals are price stability, a stable real economy with high employment and growth, and financial stability.

Uploaded by

EmadRa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Central Bank

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1- Central Bank is the entity responsible for overseeing the


monetary system for a nation.
2- Central banks have a wide range of responsibilities, from
overseeing monetary policy to implementing specific goals such
as currency stability, low inflation and full employment.
3- Central banks also generally issue currency, function as the
bank of the government, regulate the credit system, oversee
commercial banks, and manage exchange reserves and act as a
lender to commercial banks during times of financial crisis .
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4- More specifically, a central bank is a public
institution that manages a state's currency,
money supply, and interest rates.
5- In contrast to a commercial bank, a central
bank possesses a monopoly on printing the
national currency, which usually serves as the
nation's legal tender.
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6- The main function of a central bank is to manage the
nation’s money supply (monetary policy), through active
duties such as managing interest rates, setting the reserve
requirement , and acting as a lender of last resort to the
banking sector during tines of bank insolvency or financial
crisis.
7- Central banks usually also have supervisory powers,
intended to prevent commercial banks and other financial
institutions from reckless or fraudulent behavior.
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8- There are three key goals of modern monetary policy.

• The first goal: is price stability or stability in the value of


money.
• Today this means maintaining a low rate of inflation.
• The second goal: is a stable real economy, often
interpreted as high employment and sustainable economic
growth.
• The third goal: is financial stability. This includes an efficient
and smoothly running payments system and the prevention
of financial crises.
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Functions of central bank


1- Governance arrangements for the monetary policy function:

• One of the most challenging tasks in central bank design is to

organize the governance structure in a manner that permits policy

makers to meet their macroeconomic stabilization objectives

while remaining accountable for their actions.


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2- Delegation of independent authority:

• Monetary policy actions can be politically sensitive. For this

reason, it is now typical to insulate them from political pressure

by assigning them to an independent agency.


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3- Setting objectives:
Price stability is the primary objective in most central
bank legislation enacted over the past decade.
4- Exchange rate regime .
5- Governance arrangements for the financial
stability function .
6- Management of financial system liquidity and
lender of last resort.
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7- Stability of the payment system .

8- Financial stability. .

9- Financial regulation, prudential policy and

prudential supervision.

10- Governance arrangements for other functions

.
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