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Role of Central Bank

In: Business and Management

Submitted By marsh
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Role of the Central Banks and their involvement with Government Fiscal Policy

Introduction:
The central bank is the public sector bank of a country which owned by the government and not by the private sector. It is responsible for major financial, economic status of a country. It is also responsible for various policies that control the economic situation of a county which includes the monetary and the fiscal policy which are intended to run a country with at a stable state of economy. The central bank has also has the responsibility for the issue of currency and also holds hold deposit it for other private sector banks. Examples of Central banks: The bank of Canada, Federal reserve, European central bank, the bank of England, The reserve bank of India etc.
The Roles:
Different central banks have some different goals but most of them have common goals. The major roles are setting up and marinating a monetary policy, fiscal policy and bank notes. These policies are created to maintain stability in an economy. Following the policy will intern takes its responsibility towards the next level by taking responsibility in maintaining price stability in an economy; it acts as the bank for the government. The central bank is the lender of loss resort and it controls the supply of money and taxation policies in an economy. It is responsible to monitor the banking system of the country. It controls the interest rates by buying selling of bonds, it also watches over the cash reserve ratio and plays a major role in foreign exchange market.
The Fiscal Policy:
“Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation's economy. It is the sister strategy to monetary policy with which a central bank influences a nation's money supply” (Heakal, 2006). The fiscal policy acts a second level adjust policy that…...

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