staff? How far should central banks get involved in data collection and areas such as seasonal adjustment, as well as economic analysis?
Introduction
Though Central Bank is viewed as one of the primary mechanisms of macroeconomic stabilization there are a number of arguments about other areas of Central Bank’s involvement. This paper will explore the different areas, including the role of Central Bank in effecting monetary policy and intervening body in exchange rate trades, Central Bank as a Last Lender Resort (LLR), and Central Bank as a regulatory body of the financial sector. Prior to further discussion, it is important to stress that the role of Central Bank and the scope of its involvement may vary due to the effect of different legislations and the presence of various stakeholders. Thus, US Central Bank does not act as a regulatory body of the financial sector (Driffill et al., 2005), whereas the intervention activity of Japan Central Bank requires the approval of other governmental bodies (Fujiwara, 2005).
This paper discusses the importance of Central Bank's publications of economic forecasts and other information related to Central Bank's views of the further state of macroeconomic trends. The discussion shows that this information is highly important for other market players and forecasting agencies as it reduces the information asymmetry.
The role of Central bank in macroeconomic stabilization
Chandavarkar (1996 cited in Geraats, 2002) claims that macroeconomic stabilization is the pivotal role of the Central Bank. The stabilization duties include such aspects as the stabilization of the domestic price level and exchange rate as well as domestic payment systems. The entry and operations of MNEs on the domestic market as well is the growing interdependence of the domestic economy on the business cycles of other leading global players might create