14 Facts About Central bank

Central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system.

In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base.

In January 2020, the European Central Bank has announced it will consider climate considerations when reviewing its monetary policy framework.

Central bank affects the monetary base through open market operations, if its country has a well developed market for its government bonds.

Some have envisaged the use of what Milton Friedman once called "helicopter money" whereby the central bank would make direct transfers to citizens in order to lift inflation up to the central bank's intended target.

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The economic logic behind central bank independence is that when governments delegate monetary policy to an independent central bank and away from elected politicians, monetary policy will not reflect the interests of the politicians.

An alternative to central bank independence is to have fixed exchange rate regimes.

Central bank independence is usually guaranteed by legislation and the institutional framework governing the bank's relationship with elected officials, particularly the minister of finance.

Literature on central bank independence has defined a cumulative and complementary number of aspects:.

The support for independence from the international organizations derives partly from the connection between increased independence for the central bank and increased transparency in the policy-making process.

The currency crisis of 1797, caused by panicked depositors withdrawing from the Central bank led to the government suspending convertibility of notes into specie payment.

People's Bank of China evolved its role as a central bank starting in about 1979 with the introduction of market reforms, which accelerated in 1989 when the country adopted a generally capitalist approach to its export economy.

The role of a central bank was ended in the Bank War of the 1830s by President Andrew Jackson when he shut down the Second Bank as being too powerful and elitist.

Chief executive of a central bank is usually known as the Governor, President or Chair.