Central bank in a global economy

Central bank in a global economy

Introduction

Central Bank is considered to be monetary authority within a country which controls money supply within nation, regulates the commercial banking system, implement monetary policy and highlights the country in international financial matters. With evolution around the world and many variety tasks being performed around the globe among them one specific task is Central Banking. It is amongst one of the vital functions performed by government and it is being present since as long as money itself has existed. Central Bank perform various functions among them some important functions are to act as a bank for the government, check and monitor private banking system, establishes and incorporate domestic monetary policy, and influence the nation's currency value.

Discussion

Central bank, which are regarded as national institutions, establish with specific connection in the life of their home countries in order to identify various kind of problems. These problems are not identical at every time. Initially, Central bank was supposed to facilitate the financing of government in exchange that is being regarded as a monopolistic in issuing fiat currency. After that many central bank came into existence after the serious crash of the economies towards bankruptcy to be moderator in that time and act as the domestic banking system's “lender of the last resort” through which they able to meet up liquidity issues by providing unlimited liquidity to match up with a run on deposits. Still further development enacted in central banks especially in underdeveloped regions where it was created to centralize not only bank reserves side by side also foreign exchange reserves, so as to handle with balance of payments crises. Ahead to its there are few exceptions yet central bank in hold of managing currency issues and focusing on dealing questions regarding foreign exchange issues as well as ensuring the basic stability of the financial system. Going further ahead, Central bank also had one task of supervising other banks to avoid crises that were evolving in the financial system and it has been taken for granted. Moreover, today it is found that central bank role and their concern over states has grown more widely. Most of the central banks played a role in development of policies, and as an instrument of international competitiveness, and, in very limited cases to be an instrument of supporting the development of a strong financial sector for domestic purposes. Hence it is positioned to become and remained a world financial hub.

Central Bank, with this implication and under formal or formal or consensual agreement with authorities, regarded to be a vital instrument of national economic policies and for the most powerful nations it has also includes foreign policies. Much debate to be done for identifying over which specific national interests resulted into creation of such policies. With the implication of gold standard a rule that is the maintenance of gold parities under adverse movements in the balance of payments resulted into central bank to take initiative in ...