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2019 | Book

Introduction Read chapter Read first chapter

Understanding Central Banks

Author: Dr. Nils Herger

Publisher: Springer International Publishing

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

Issues related to central banks feature regularly in economic news coverage, and in times of economic or financial crisis, especially when a commercial bank is bailed out, they become the focus of the policy debate. But what role do central banks play in a modern economy? How do central banks wield influence over the financial system and the broad economy? Through which channels does monetary policy impact macroeconomic fundamentals such as inflation or unemployment? For example, how does a central bank alter the money supply? What are the benefits of central bank independence, and what are the up- and downsides of having a common currency? This book provides easily accessible answers to these and other questions associated with central banking.

Table of Contents

Frontmatter
Chapter 1. Introduction
Abstract
This chapter provides an overview of the role of central banks within the economy. In particular, the corresponding connections are discussed by looking at the monetary flows between the central bank, the financial system, the public sector, firms, and households.
Nils Herger
Chapter 2. A Brief History of Central Banks
Abstract
This chapter summarises the history of central banking. Key events of the history of central banks include the establishment of the first note-issuing banks during the seventeenth century, the era of the classical gold standard during the nineteenth century, the Great Depression and the Bretton Woods system during the twentieth century, as well as the European monetary integration and the Global Financial Crisis in recent decades. Across centuries, the economic role of central banks has changed dramatically. This process has eventually led to modern central banking, where monetary policy is used as a macroeconomic instrument to stabilise prices, the financial system, and economic activity.
Nils Herger
Chapter 3. Money: Lubricant of the Economy
Abstract
This chapter is devoted to the economic aspects of money. Specifically, the various economic functions and the different forms of money are discussed. Furthermore, the chapter deals with the role of commercial banks in the money-and-credit multiplication process.
Nils Herger
Chapter 4. Monetary-Policy Instruments
Abstract
The instruments (or tools) of monetary policy are the topic of this chapter. Based on the central bank’s balance sheet, the role of discount policy to refinance commercial banks, the base interest rate, minimum-reserve requirements, as well as open-market operations and foreign-exchange interventions are discussed.
Nils Herger
Chapter 5. Money, Credit, and Banking
Abstract
This chapter deals with stability issues in the banking sector and the financial system. In particular, the first part of the chapter uncovers the principal causes of banking and financial crises. The second part looks at how central banks can foster financial stability by, for example, acting as lender of last resort or supervising commercial banks and the payment infrastructure.
Nils Herger
Chapter 6. The Initial and Final Effects of Monetary Policy on Inflation, Output, and (Un)employment
Abstract
This chapter deals with the macroeconomic effects of monetary policy. Specifically, a distinction is made between economic effects in the long-term—during which economic conditions, such as prices, can react flexibly and, thus, the neutrality property of money holds—and the short-term—during which monetary policy affects the business cycle and employment via the so-called ‘monetary-policy transmission mechanisms’.
Nils Herger
Chapter 7. Central-Bank Independence
Abstract
This chapter focuses on the independence of central banks. Constraints on governments as regards the setting of monetary policy are widely seen as a remedy against high inflation. Reasons why independent central banks produce less inflation include their autonomy from political pressure to finance public expenditure via printing money, and their ability to consider the long-term effects of loose monetary policy.
Nils Herger
Chapter 8. International Monetary Policy
Abstract
This chapter discusses the international aspects of monetary policy. These aspects include the advantages and disadvantages of fixed and floating exchange-rate regimes, the role of international reserves, the causes and consequences of currency crises, and the pros and cons of common currencies, such as the euro.
Nils Herger
Chapter 9. Final Chapter: The Past, Present, and Future of Central Banking
Abstract
This chapter draws some conclusions as regards the possibilities and limitations of monetary policy and central banking.
Nils Herger
Backmatter
Metadata
Title
Understanding Central Banks
Author
Dr. Nils Herger
Copyright Year
2019
Electronic ISBN
978-3-030-05162-4
Print ISBN
978-3-030-05161-7
DOI
https://doi.org/10.1007/978-3-030-05162-4