Date post: | 11-Nov-2014 |
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Economy & Finance |
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The Central BankThe Central Bank
The Central BankThe Central Bank
1-Simple overview 2-Definition 3-Responsibilities
4- How the Bank
Influences an Economy
Simple overviewSimple overview
The central is pubic corporate entityThe central is pubic corporate entity
Was established in 1973 as Bahrain Monetary AgencyWas established in 1973 as Bahrain Monetary Agency
The central Bank is responsible for maintaining monetary and The central Bank is responsible for maintaining monetary and financial stability in the kingdom industryfinancial stability in the kingdom industry
The Bank is located in the Diplomatic. It also houses a The Bank is located in the Diplomatic. It also houses a splendid coin & currency museum with collections dating back splendid coin & currency museum with collections dating back
to 653 ADto 653 AD
Definition:Definition:
AA central bankcentral bank, , reserve bankreserve bank, , oror monetary authoritymonetary authority is a is a public institution that manages thepublic institution that manages the currency in the currency in the KingdomKingdom,, money supply money supply, , interest rates and oversee the interest rates and oversee the commercial banking systemcommercial banking system of Bahrainof Bahrain
ResponsibilitiesResponsibilities
Implement monetary policyImplement monetary policy
Supervise and regulate the banking sectorsSupervise and regulate the banking sectors
Act as the government fiscal agentAct as the government fiscal agent
Encourage the growth of Bahrain as a major international Encourage the growth of Bahrain as a major international financial centrefinancial centre
Manage the foreign currency cash reserves of the kingdomManage the foreign currency cash reserves of the kingdom
Determining and setting the official Determining and setting the official interest rate – used to manage both interest rate – used to manage both inflation and the country’s exchange rate.inflation and the country’s exchange rate.
How the Bank Influences an How the Bank Influences an EconomyEconomy
A central bank can be said to have two A central bank can be said to have two main kinds of functions: main kinds of functions:
(1) (1) MacroeconomicMacroeconomic when regulating when regulating inflation and price stabilityinflation and price stability
(2) (2) MicroeconomicMicroeconomic when functioning as a when functioning as a lender of last resort.lender of last resort.
Macroeconomic InfluencesMacroeconomic Influences
As it is responsible for price stability, the central As it is responsible for price stability, the central bank must regulate the level of inflation by bank must regulate the level of inflation by controlling money supplies by means of monetary controlling money supplies by means of monetary policy. The central bank performs open market policy. The central bank performs open market transactionstransactions that either inject the market with that either inject the market with liquidity or absorb extra funds, directly affecting the liquidity or absorb extra funds, directly affecting the level of inflation. level of inflation.
Microeconomic InfluencesMicroeconomic Influences
For example If the commercial bank does not For example If the commercial bank does not have enough liquidity to meet its clients' have enough liquidity to meet its clients' demands (commercial banks typically do not demands (commercial banks typically do not hold reserves equal to the needs of the entire hold reserves equal to the needs of the entire market), the commercial bank can turn to the market), the commercial bank can turn to the central bank to borrow additional funds. central bank to borrow additional funds.
QuestionsQuestions
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