THE ROLE OF CENTRAL BANKS IN THE ECONOMY AND THEIR IMPORTANCE IN MONETARY POLICY
Keywords:
Central banks, monetary policy, inflation control, financial stability, economic growth, interest rates, money supply, banking system, open market operations, economic crises, reserve requirements, discount rate.Abstract
Central banks play a pivotal role in shaping the economic landscape of a nation through their influence on monetary policy, financial stability, and overall economic performance. This article explores the multifaceted functions of central banks, focusing on their responsibilities in managing inflation, controlling interest rates, regulating the money supply, and ensuring the stability of the banking system. The paper also examines how central banks use tools such as open market operations, reserve requirements, and the discount rate to implement monetary policy effectively. Additionally, it highlights the importance of central banks in responding to economic crises and their role in fostering long-term economic growth. The article concludes by underscoring the significance of central banks in achieving sustainable economic stability and the challenges they face in an increasingly complex global financial
environment.
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