Central banks
Introduction
Central banks have a monopoly on issuing the national currency, and the primary responsibility of a central bank is to maintain a stable national currency for a country (or a stable common currency for a currency union). Stability is sometimes specified in terms of inflation and /or growth rate in the money supply.
Other important responsibilities include providing banking services to commercial banks and the government and regulating financial markets and institutions. In this sense, a central bank is the “bankers’ bank'' - other banks can borrow from or lend money to the central bank. Therefore, all banks in a country have an account in the central bank. When a commercial bank orders currency from the central bank, the corresponding amount is withdrawn from tins account. Tins account is also used for transfers between commercial banks. Central banks also manage the country’s foreign exchange and gold reserves.
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