Functions of central bank , Managerial Economics

FUNCTIONS OF CENTRAL BANK

Economists and financial experts lack in unanimity about the functions of a central bank. According to Kisch and Elkin, the essential function of a central bank is the maintenance of the stability of the economy standard. While for Shaw it consists in the control of credit. De Kock has removed the confusion by mentioning the following seven function of a central bank in his well known book central bank banking. According to him a central bank is a

1.Bank of issue.
2.Banker, agent and financial adviser to government.
3.Custodian of member banks cash reserves.
4. Custodian of nation foreign exchanges reserves.
5. Lender of last resort.
6.Bank of central settlement and transfer acting a clearing house.
7.Controller of credit.

The functions of a central bank are different from those of commercial bank. Firstly, a central bank is established for public service rather than for private profit. Unlike commercial bank is, its operations are not basically guided by profit motive. Secondly a central bank has special relationship with the government of the country . since the central bank acts as the banker to the government , the latter informally influences its activity. Thirdly a central bank generally does not deal directly with the public. It deals with the public indirectly through the commercial banks and the money market. It does not accept deposits from the public as doing so would amount to usurping the usual banking function of the commercial banks. This is not, however, to deny that many central bank conducted commercial banking business in the beginning of their career. In fact almost without exception central bank before 1914 engaged in their regular commercial banking business with the general public and in some cases on a very substantial scale. With a wide network of branches throughout the country. This brought these banks into some measure of direct competition with the commercial banks. Concern for earnings moreover, all too often coloured their operations and policies to the detriment of their central banking responsibilities the bank of England being a good case in point. In this connection, it is pertinent to state that virtually all the central banks before 1914 were privately owned.

Posted Date: 12/1/2012 6:36:59 AM | Location : United States







Related Discussions:- Functions of central bank , Assignment Help, Ask Question on Functions of central bank , Get Answer, Expert's Help, Functions of central bank Discussions

Write discussion on Functions of central bank
Your posts are moderated
Related Questions
discuss the significance of managerial economics in regards to business strategies employed by business entities currently operating in the global economy

Imagine of these concepts (markets, elasticity, production, costs, market structures).  Take one or two of those concepts and use it to examine and understand economic situations o

Q=5K0.4 L0.6 WHERE K is number of mchine,L s number of labour, price of unit is RM24 & wages og each lanour rm12. the company constraint by it budget rm 1500 per time period. a) co

In this question you will consider the impact on the building industry of the earthquake. Two construction and materials indices have been provided for the analysis.  If your famil

Keynes Theory Keynes views about trade cycle entitled notes on the trade cycle of his classic the general theory of employment interest and money published in 1936. Although K

Question 1: a. What are the different channels of monetary policy? b. Discuss why the channels of monetary policy are likely to change in the wake of financial liberaliz

when firm can achieve optimization

What is identity economics? How does identity economics help to explain economic questions that standard economics fails to address?

The comparability principle Associations representing workers providing services - clerical, postal, teaching, etc. - have always attempted to  apply the "principle of comparab

Disadvantages of the Planned System The centrally planned economies suffer from the following limitations: Lack of choice:   Consumers have little influence over what is p