The central bank has been described as "the lender of last resort", which means that it is responsible for

providing its economy with funds when commercial banks cannot cover a supply shortage. In other words, the central bank prevents the country's banking system from failing. However, the primary goal of central banks is to provide their countries' currencies with price stability by controlling inflation. A central bank also acts as the regulatory authority of a country's monetary policy and is the sole provider and printer of notes and coins in circulation. Read more: http://www.investopedia.com/articles/03/050703.asp#ixzz2CroY0LRl

etween 1870 and 1914, when world currencies were pegged to the gold standard (GS), maintaining price stability was a lot easier because the amount of gold available was limited Read more: http://www.investopedia.com/articles/03/050703.asp#ixzz2CrssQbt8 At the outbreak of WWI, the GS was abandoned, and it came apparent that, in times of crisis, governments, facing budget deficits (because it costs money to wage war) and needing greater resources, will order the printing of more money. As governments did so, they encountered inflation. After WWI, many governments opted to go back to the GS to try to stabilize their economies. With this rose the awareness of the importance of the central bank's independence from the political machine. Read more: http://www.investopedia.com/articles/03/050703.asp#ixzz2Crsy1ksF

How the Bank Influences an Economy

Macroeconomic Influences As it is responsible for price stability, the central bank must regulate the level of inflation by controlling money supplies by means of monetary policy. The central bank performs open market transactions that either inject the market with liquidity or absorb extra funds, directly affecting the level of inflation. To increase the amount of money in circulation and decrease the interest rate (cost) for borrowing, the central bank can buy government bonds, bills, or other government-issued notes. This buying can, however, also lead to higher inflation. When it needs to absorb money to reduce inflation, the central bank will sell government bonds on the open market, which increases the interest rate and discourages borrowing. Open market operations are the key means by which a central bank controls inflation, money supply, and price stability. If you'd like to learn more about this subject, see this The Federal Reserve (the Fed) Tutorial.

Read more: http://www.investopedia.com/articles/03/050703.asp#ixzz2Cry0ztap

Macroeconomic Influences As it is responsible for price stability, the central bank must regulate the level of inflation by controlling money supplies by means of monetary policy. The central bank performs open market transactions that either inject the market with liquidity or absorb extra funds, directly affecting the level of inflation. To increase the amount of money in circulation and decrease the interest rate (cost) for borrowing, the central bank can buy government bonds, bills, or other government-issued notes. This buying can, however, also lead to higher inflation. When it needs to absorb money to reduce inflation, the central bank will sell government bonds on the open market, which increases the interest rate and discourages borrowing. Open market operations are the key means by which a central bank controls inflation, money supply, and price stability. If you'd like to learn more about this subject, see this The Federal Reserve (the Fed) Tutorial.

Read more: http://www.investopedia.com/articles/03/050703.asp#ixzz2Cry0ztap

The rate at which commercial banks and other lending facilities can borrow short-term funds from the central bank is called the discount rate (which is set by the central bank and provides a base rate for interest rates). It has been argued that, for open market transactions to become more efficient, the discount rate should keep the banks from perpetual borrowing, which would disrupt the market's money supply and the central bank's monetary policy.

Read more: http://www.investopedia.com/articles/03/050703.asp#ixzz2Cs0D1XKF

Conclusion Central banks are responsible for overseeing the monetary system for a nation (or group of nations), along with a wide range of other responsibilities, from overseeing monetary policy to implementing specific goals such as currency stability, low inflation and full employment. The role of the central bank has grown in importance over time, but in U.S., its activities continue to evolve. Read more: http://www.investopedia.com/articles/03/050703.asp#ixzz2Cs0JbiCI

Central bank of US

he First Bank of the United States: 1791-1811

The Constitution itself prohibited state governments from issuing their own currency. The Bank of the United States was conceived in 1790 to deal with the war debt and to put the government on sound financial footing. It was intended to help fund the government's debt and issue currency notes. Hamilton, then President George Washington's Treasury secretary, was the architect of the Bank, which he modeled after the Bank of England

Central bank of china

In 1923, Dr. Sun Yat-sen, National Father of the Republic of China, promoted the establishment of the Central Bank of China (the Bank) with the primary goal of financing national developments. The Bank was inaugurated in Canton in the following year. Since then the Bank developed with a vision to be in line with the modern concept of central banking. In December 1949, the Bank relocated with the government from Mainland China to Taipei, and in 1961, resumed its operations there. On November 8, 1979, the newly revised Central Bank of China Act was promulgated. While the Bank has since been under the Executive Yuan (Cabinet), its independent role in making monetary policy has not been changed. Operations of china

According to the Central Bank of China Act, the Bank's operational objectives include promoting financial stability, ensuring sound banking operations, maintaining the stable internal and external value of the currency and, within the scope of the above three objectives, fostering economic development. In order to achieve its operational objectives, the Central Bank of China conducts the following operations:

Search

Monetary Management Treasury Agency Functions Currency Issuance Clearing and Settlement Services Foreign Exchange Management Participation in International Organizations Statistics and Research Bank Examination

http://www.cbc.gov.tw/lp.asp?ctNode=453&CtUnit=271&BaseDSD=7&mp=2

choronology of china bank 1991

The Central Bank of the Republic of China (Taiwan),[1][2] known in English from 1924 to 2007 as the Central Bank of China,[3] is the central bank of the Republic of China (Taiwan).[4] Its legal and common name in Chinese is literally translated as the "Central Bank". The central bank is administered under the Executive Yuan of the ROC government.[5] The bank was originally established in 1924 under Sun Yat-sen's administration in Guangzhou. Following the success of the Northern Expedition, the Central Bank took over the role of central bank for China from the Bank of China in 1928, with its headquarters in Shanghai. Before 1949, it was one of China's "Big Four" national banks, along with the Bank of China, Bank of Communications, and Farmers Bank of China.

Aug. 14

Aug. 20

Sep. 10

Sep. 11

The Bank revised the Directions for the Central Bank of the Republic of China (Taiwan) Accommodations to Banksto maintain appropriate monetary supply growth. An on-line link was established between the Taipei Foreign Currency Call-loan Market and a Hong Kong money broker. The Bank lowered the discount rate, the rate on accommodations with collateral and the rate onaccommodations without collateral by 50 basis points each to6.875 percent, 7.875 percent, and 11.125 percent, respectively. The Bank lowered the required reserve ratios by 0.75of a percentage point on demand savings deposits, demand deposits and checking deposits, and on trust funds.

Oct. 11

The Bank allowed authorized banks to conduct foreign currency cross currency swaps. The Bank enacted the Guidelines for Authorized Banks in Conducting Negotiation of Drafts by TaiwanArea Firms for Exports from Mainland China. 1. The Bank lowered the discount rate, the rate on accommodations with collateral and the rate onaccommodations without collateral by 37.5 basis points each to 6.25 percent, 7.25 percent, and 10.5 percent, respectively.

Nov. 9

Nov. 18

1993

Jan. 8

Jan. 16

Feb. 10

Authorized b were allowed decide whethe collect mar from clients w conducting for currency ma trading. The ceiling on investment in l securities made by an individual Q was raisedfrom US$50 million US$100 million. The Bank raised the ceiling on foreign liabilities of authorized bank US$400 million

Aug. 11

The Regulation Governing the Foreign Exchange Settlement of Private Sector Inward Remittances was modified, making the quota of inward remittances by a company, a firm and an association US$5 million per year.

1994

Jan. 1

Jan. 5

Feb. 16

The ceiling inward/outward remittances by company and firm was ra from US$5 mi to US$10 millio The Bank raised the ceiling on foreign liabilities of authorized bank about US$600 million. The Banks London Representa Office was established.

Aug. 22

The Bank increased its provision of seed funds in the Taipei Foreign Currency Call-loan Market. Seed funds in USdollars were raised from US$7 billion to US$10 billion, those in Deutsche Marks from DM$0.5 billion to DM$1 billion, and an additional Japanese Yen 10 billion was set aside for the market

1995

Jan. 15

The Bank amended the Regulation Governing the Foreign Exchange Settlement of Private Sector Inward Remittances and the Regulation Governing the Foreign Exchange Settlement of Private Sector Outward Remittances, shortening therequired waiting period of a remittance of more than US$1 million from 10 business days to 3 business days.

Jan. 1 1. The Bank promulg ated the Guidelin es Governi ng Financia l Institutio ns in Kinmen and Matsu Engagin g in Remittan ceswith Mainlan d China Regardi ng Inbound and Outboun d Goods and Staff and the Regulati ons Governi ng Settleme nts of Purchas e and

Apr. 18

The Bank amended article 7 of the Regulations Governing the Audit and Adjustment of Deposit and Other Liability Reserves of Financial Institutions. The amendment took effect onApril 23, 2001.

2001

Dec. 31

The Bank amended articles 2 and 6 of the Regulations Governing the Declaration of Foreign Exchange Receipts and Disbursements or Transactions regarding the definition of declarers, the competent appointment of proxies, and the declaration of foreign nationals and foreign legal entities without obtaining residential certificates or registration from the government.

2006

Jan. 25

The Bank allowed futures enterprises that engage in consigned trading in overseas futures markets to make remittances directly with approval documents

2007

Jan. 25

In line with the practice of antimoney laundering, the Bank amended the Regulations Governing

the Establishment and Administration of Foreign Currency Exchange Bureaus to enhance the management of such bureaus.

discount window policy

The Bank implements its discount window policy by either changing the discount rate or providing credit to banks. Three types of credit are available, namely, discounts, accommodations with collateral, and accommodations without collateral. Changes in the discount rate signal the Bank's policy stance. However, its effect on market interest rates may not be significant if it is not accompanied by other monetary policy tools.

monetary instrument
Selective credit controls refer to measures taken by the Bank to restrict certain types of credit extended by financial institutions. For example, during the second half of the 1980s, Taiwan experienced asset price inflation which was mainly characterized by soaring stock and real estate prices. To battle against this asset inflation, the Bank once imposed a series of selective credit controls on bank loans secured against vacant plots of land and on loans made to investment companies, in addition to raising required reserve ratios and the discount rate.

Utilizing Foreign Exchange Reserves

In addition to the basic principles of maintaining liquidity, security, and profitability, the Bank's utilization of foreign exchange reserves has also been dedicated in recent years to promoting economic development and industrial upgrading. For this purpose, the Bank has adopted 3 measures: 1. Through the foreign exchange market, the Bank appropriates the funds needed by domestic enterprises to import major items of machinery and equipment. 2. The Bank has already appropriated USD20 billion, EUR 1 billion, and JPY 80 billion as seed funds for the Taipei foreign currency call-loan market. This market has also established a computerized network system with brokerage firms in major international financial centers.

3. The Bank has deposited a portion of its foreign exchange reserves in the overseas branches of our domestic banks to promote international financial activities and to support the Taiwanese firms located there.
Operations of cbc Monetary amangemjent

Forign exchange management Financial stability and bank supervision Payment and settlement systems Goevrnmet security services Currency issuance Pressw release Speeches Publications http://www.cbc.gov.tw/np.asp?ctNode=445&mp=2

efore digging into the Monetary Policy Committee, it is probably necessary to give a brief retrospect on Chinas central bank - The Peoples Bank of China (PBOC). The PBOC was established on December 1st, 1948. After the banking system consolidation in the early 1950s, technically the PBOC became the only bank in mainland China from 1952 to 1978. It was responsible for both central banking and commercial banking in the planned economy period. During the economy reforms in the 1980s, commercial banking operations were split off into four state-owned banks and the PBOC started to act as a modern central bank. But it was until 1995 that its central bank status was legally confirmed. The 3rd Plenum of the 8th National People's Congress passed the Law of Peoples Bank of China on March 18, 1995. In 1998, the PBC underwent a major restructuring. All provincial and local branches were abolished, and the PBC opened nine regional branches, whose boundaries did not correspond to local administrative boundaries. In 2003, the Standing Committee of the Tenth National People's Congress approved an amendment law for strengthening the role of PBC in the making and implementation of monetary policy for safeguarding the overall financial stability and provision of financial services.

he PBOC has to get the admission from the State Council before they decide to change benchmark interest rates, but they have the authority to manage reserve requirement ratio and open market operations. Exchange rate policy also has a significant impact on monetary policies, because Chinas capital account is strictly controlled and the currency is under a managed-floating system. The central bank has to buy US dollar and sell Renminbi, or do it reversely in the market to keep the exchange rate stable.

Although the overall performance of growth and inflation in chian has been remarkable the economy has experienced several growth and inf,lation cycle since its reforms in 1978 in china higher than the avg growth leads to higher to higher than the avg inflastion in the two years leads to lower than the avg growth in the succeeding years ..chinas transitions to the market economy and further the shoch therapy in the Europe leads lto the higher inflation

http://books.google.co.in/books?id=dv_AkahoPiYC&pg=PA289&lpg=PA289&dq=how+does+central+ban k+of+china+was+helpful+in+controlling+inflation&source=bl&ots=Iv3npuuS_d&sig=IhQEnl8pH4XHTHLLr M_tjRC7Wd4&hl=en&sa=X&ei=x0OuUIeRFIftrQfpg4CQAw&ved=0CEgQ6AEwAzgK#v=onepage&q=how% 20does%20central%20bank%20of%20china%20was%20helpful%20in%20controlling%20inflation&f=fals e

Central Bank of India (Marathi:

), a government-owned bank, is one of the oldest

and largest commercial banks in India. It is based in Mumbai.[2] The bank has 4100 branches and 270 extension counters across 27 Indian states and three Union Territories.

central bank of India is one of 18 Public Sector banks in India to get recapitalisation[4] finance from the government over the next 24 months. The infusion of funds will improve the financial health of the banks as their capital adequacy ratio (CAR) will be raised more than desired level of 12 percent. The increase in CAR of the banks will also enable them to lend more money. The CAR of Central Bank of India was less than 12 percent as on 30 June 2006. Central Bank of India has approached the Reserve Bank of India (RBI) for permission to open representative offices in five locations - Singapore, Dubai, Doha, London and Hong Kong. This is the first time the bank is venturing an independent overseas foray after the Sethia scam in the 1970s forced the

bank to close down its London office. RBI had then asked the other two banks, who had operations in London, to close down.[6

HISTORY
CENTRAL BANK OF INDIAwas established on 21 December 1911 by Sir Sorabji Pochkhanawala with Sir Pherozesha Mehta as Chairman,[8] and claims to have been the first commercial Indian bank completely owned and managed by Indians. In 1923, it acquired the Tata Industrial Bank in the wake of the failure of the Alliance Bank of Simla. In 1969, the Indian Government nationalized the bank on 19 July, together with 13 others. Central Bank of India was one of first bank to issue credit cards in the year 1980 in collaboration with MasterCard

The Reserve Bank of India (RBI) is also known as "the Central Bank of India" as it operates as the central banking system and controls the monetary policy of India. Its primary function is to ensure the country's monetary stability in India and is charged with regulating the country's currency and credit systems.. The bank creates monetary policy and assists in regulating its financial system. The Reserve Bank of India was founded as a privately owned bank in 1935; it became government-owned following nationalization in 1949. The bank is headquartered in Mumbai and it has 22 regional offices.

Also, there is another government-owned bank called "Central Bank of India". It is one of the oldest and largest commercial banks in India and headquartered in Mumbai. The bank currently has 3,563 branches and 270 extension counters throughout the country. It was established in 1911 and it claims to have been the first commercial Indian bank completely owned and managed by only Indians. In19 ...mor

Definition of 'Bank Discount Rate'

The interest rate for short-term money-market instruments like commercial paper and Treasury bills. The bank discount rate is based on the instrument's par value and the amount of the discount.

The bank discount rate is the required rate of return of a safe investment guaranteed by the bank. INFLATION

The hypothesis that inflation emerges from a wide variety of nonmonetary phenomena without the intermediation of central bank money creation implies that only infrequently is monetary policy the appropriate instrument to control inflation. The clash of a restrictive monetary policy and the powerful nonmonetary forces that drive inflation would, it was believed prior to 1980,

force up interest rates

What is special about central banks is their monopoly over the creation of the monetary basethe medium used to arrange for finality of payment. For this reason, the disastrous experiments with nonmonetary control of inflation

prior to 1980 demonstrated that inflation is a monetary phenomenon

One can use (1) to think about how the need for monetary control constrains the way that the central bank sets its interest rate target. That is, how does the central bank set its interest rate target (rT = rB) in a way that avoids money creation that sets off portfolio rebalancing by the public? The central bank must fulfill two conditions. The first is credibility for its inflation target. For example, if the public raises its expectation of inflation when the central bank lowers its interest rate target, changes in the interest rate target do not correspond to the same changes in the real (inflation-adjusted) interest rate. Expressed generally, the second condition is that the central bank must vary its interest rate target in a way that respects the working of the price system. A central part of the price system is the real rate of interest. Movements in the real rate induce individuals to accept an unequal intertemporal distribution of consumption produced by the unequal intertemporal distribution

of production.

To prevent aggregate demand from exceeding the productive potential of the economy, the central bank must raise its interest rate peg in line with the natural rate.10 In contrast, assume that the central bank puts inertia into interest rate changes by smoothing the interest rate around a base value.11 Interest rate smoothing (keeping the real rate below the natural rate) requires money creation. Monetary policy is expansionary.12 However, this situation cannot persist (Friedman, The Role of Monetary Policy, 1969). The increase in

money that allows the divergence between the real and natural rates creates no additional productive capacity. Ultimately, the additional money creation will raise the price level, and the central bank will have to allow its interest rate target to rise fully to reflect the rise in the natural rate.13

2.

If the price level is a monetary phenomenon, then the way that the central bank controls monetary base and money creation determines the behavior of inflation. Even when a central bank does not employ reserves as an instrument or money as an indicator, its operating procedures possess a characterization in terms of monetary control. The central bank achieves that control by keeping the publics expectation of inflation equal to its inflation target and by varying the funds rate in a way that causes the real interest to track the natural rate. This tracking emerges from procedures that move the funds rate away from its prevailing value in response to an estimated growth gap. By maintaining expected inflation equal to its inflation target, money and inflation grow in line with the inflation target. By maintaining the real rate of interest equal to the natural rate, the central bank prevents monetary emissions

that force undesired changes in prices.

Monetary nonneutrality arises from a coordination failure.29 When the central bank creates and destroys money in an erratic way that forces unpredictable changes in the price level, individual price setters lack a coordinated way to move their dollar prices to maintain the real purchasing power desired by the public while also preserving relative prices. Individual price setters do not capture the externalities from being the first to change their dollar prices to discover the price level that would prevail with perfect price flexibility. They

therefore make quantity adjustments initially.

How central bank controlled inflation

The first phase of rupee appreciation--due to RBI stepping back from market: Active intervention by RBI in the forex market prevented the rupee from strengthening fully in response to the dollar global weakness. Indeed, increase in foreign currency reserves by USD 86 bn between 2004 to March 2007 indicates the scale of intervention. However the obvious consequence of this was an increase in money supply and inflation. Inflation as measured by WPI ran as high as 6-6.8% from January to April 2007 while M3 continued to hover above

RBIs comfort zone. Concerns over rising inflation ultimately forced RBI to step away from the forex market in April 2007. As a result rupee appreciated at a rapid pace between April and May approximately by 10%. Besides impacting the pace of appreciation, the decision to step away from the market led to change in expectation for rupee. The market expected the currency to move in only in one direction namely appreciate, appreciate and appreciate

The second phase of rupee appreciation: Rupee was once again under strong appreciation pressure as Fed cut its rate by half-percentage point to 4.75% on Sept 18, 2007, followed by a quarter percentage point cut to 4.5% on Oct 31, 2007. The reason for the Feds decision was fears of recession following the sub-prime credit crisis. Impressive growth rates and appreciating rupee resulted in large inflows especially portfolio investment. As the move was driven more by market exuberance rather than any change in fundamentals, RBI intervened aggressively to protect the pace if not the level of rupee. The extent of RBIs dollar purchases is reflected in the USD 3.7 bn increase in its foreign exchange reserves during the week ended Sept 21. Besides direct market intervention, RBI also liberalized overseas investment norms for Indian companies and mutual funds raised the prepayment limit for ECBs and doubled the foreign remittance limit for individuals