Week 12: Central Banking Overview
The Role of Central Banks and Monetary Policy Introduction Central banks play a pivotal role in the financial and economic landscape of a country. They are responsible for formulating and implementing monetary policy, which influences economic activity, price stability, and employment levels. Understanding the functions and objectives of central banks, as well as their tools and strategies for conducting monetary policy, is crucial for grasping their significance in the global economy. The Role of Central Banks Central banks serve several key functions within an economy: Monetary Policy Formulation : One of the primary functions of central banks is to formulate monetary policy. This involves managing the supply of money and credit in the economy to achieve specific objectives such as price stability, full employment, and sustainable economic growth. Banking Supervision and Regulation : Central banks are often tasked with supervising and regulating commercial banks and other finan...