The Key Roles of the Central Bank in an Economy Assignment

The Key Roles of the Central Bank in an Economy - Assignment Example The supervision factor impelled the expansion of the official control and assessment of banks (Masciandaro, 2005). Recently, the oversight function has been changed to other agencies from the central bank. The following explains the roles of Central Bank of different countries. It is the defining characteristics of the central bank. The central banks undertake decision –making and implementation of monetary policies. However, different nations have different extensive and the responsibility assigned to the independent central bank (Schinasi, 2003). The central bank role of setting monetary policies is critically autonomous though not completely autonomous as it undertakes the implementation and decision-making stages of the monetary policy function (Al-Sabah, 1997). Therefore, the national government contributes in a certain process of monetary policy. In respect to monetary policy, the central bank is the only body that has the instrument autonomy. The Eurosystem, central ban ks governors from different nations participate in an ex officio ability in the monetary policy process. The countries central banks jointly make a decision regarding monetary policy, therefore, national central banks do not make independent decisions (Al-Sabah, 1997). As compared to the monetary policy the central bank has complete autonomy concerning the implementation of exchange rate policy (Al-Sabah, 1997). Criteria used in decision-making sometimes political direction. Since exchange controls were built principally as exchange rate devices, these instruments have been allocated to the central bank although it could be done by tax authorities. Responsibilities regarding financial stability are considered an essential role of the central bank. The central bank is considered to have a full responsibility for ensuring financial stability and acts as financial system oversight body (Johnson, 1997).