Central Banking

Abstract

Central banks date from the late nineteenth century but the great majority from the twentieth century. They are institutions whose principal purpose is to provide stable monetary and financial conditions, though their functions have varied over time. Claims made for the banks’ powers have often been greater than was merited. This chapter sets out how central banks’ responsibilities arose and how they have been fulfilled. It gives particular attention to something that was almost lost sight of in recent years that of their traditional responsibility for financial stability. Other aspects of central banking are then discussed: the role they might have in supervision/regulation; central bank co-operation has played; and the meaning and desirability of central bank independence.