Central banking system and its functions Manto Alexander Budget and Treasury Academy in Moscow Academy in Moscow2009

Contents Definition Definition Main functions Main functions Currency issuance Currency issuance Naming of central banks Naming of central banks Main policy instruments Main policy instruments Conclusion Conclusion

Central bank Monetary authority of a country granted the Monetary authority of a country granted the exclusive privilege to lend a government its exclusive privilege to lend a government its currency. currency.

Main functions controlling money supply controlling money supply money issuance money issuance setting the official interest rate setting the official interest rate implementing monetary policy implementing monetary policy

Currency issuance Exclusive privilege of a central bank Exclusive privilege of a central bank

Examples of naming Bank of countryNational bank ofReserve bank of

Main policy instruments Open market operations Open market operations Reserve require ratio Reserve require ratio Discount rate policy Discount rate policy

Open market operations Do not require the immediate printing of new currency Do not require the immediate printing of new currency Most frequently used tool of central bank Most frequently used tool of central bank

Required reserve ratio

Discount rate policy Affect the balance between demand and supply Affect the balance between demand and supply Taken into account before starting business Taken into account before starting business

Conclusion Central bank system becomes the most important mean of economy policy in crisis period Central bank system becomes the most important mean of economy policy in crisis period

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