How does Central Bank work?

by zeyang.w

Central Bank is the main institution responsible for the country or region (such as the EU) monetary policy, usually an economic community only currency issuer. The bonds were issued to normal lending and buying foreign exchange.

The main responsibilities of the central bank is to maintain the stability of the national currency and the supply, but more often also includes control discount rates, as well as the last pillar of the banking sector borrowers haste, trying to stabilize the financial markets during the financial crisis. Also typically perform the following functions:

Implementing monetary policies. It is used to manage both inflation and the country's exchange rate and ensuring that this rate takes effect via a variety of policy mechanisms.

In order to intervene in the economy, changes in interest rates by the indirect approach to regulate currency. In a recession, lower interest rates and expand money supply to stimulate economic development. In the expansion period, raise interest rates, reduce the money supply, and inhibit malignant economic development.

Controlling the nation's entire money supply. The central bank bills issued with strong liquidity and currency, you can always as means of circulation and means of payment directly into the circulation, thus affecting the changes in market supply and demand. For example, demand deposits of commercial banks, at any time and issue checks into circulation, so the mobility is also very strong, but also an important factor in market supply and demand changes.

resources:
David Dayen."Why America's central bank is failing-and how we can make it work for us.". SALON.Web. Feb, 2016.