Functions of central bank , Managerial Economics

Assignment Help:

FUNCTIONS OF CENTRAL BANK

Economists and financial experts lack in unanimity about the functions of a central bank. According to Kisch and Elkin, the essential function of a central bank is the maintenance of the stability of the economy standard. While for Shaw it consists in the control of credit. De Kock has removed the confusion by mentioning the following seven function of a central bank in his well known book central bank banking. According to him a central bank is a

1.Bank of issue.
2.Banker, agent and financial adviser to government.
3.Custodian of member banks cash reserves.
4. Custodian of nation foreign exchanges reserves.
5. Lender of last resort.
6.Bank of central settlement and transfer acting a clearing house.
7.Controller of credit.

The functions of a central bank are different from those of commercial bank. Firstly, a central bank is established for public service rather than for private profit. Unlike commercial bank is, its operations are not basically guided by profit motive. Secondly a central bank has special relationship with the government of the country . since the central bank acts as the banker to the government , the latter informally influences its activity. Thirdly a central bank generally does not deal directly with the public. It deals with the public indirectly through the commercial banks and the money market. It does not accept deposits from the public as doing so would amount to usurping the usual banking function of the commercial banks. This is not, however, to deny that many central bank conducted commercial banking business in the beginning of their career. In fact almost without exception central bank before 1914 engaged in their regular commercial banking business with the general public and in some cases on a very substantial scale. With a wide network of branches throughout the country. This brought these banks into some measure of direct competition with the commercial banks. Concern for earnings moreover, all too often coloured their operations and policies to the detriment of their central banking responsibilities the bank of England being a good case in point. In this connection, it is pertinent to state that virtually all the central banks before 1914 were privately owned.


Related Discussions:- Functions of central bank

Where does the firm operate, Where does the firm Operate? The firm wil...

Where does the firm Operate? The firm will avoid stages I, II and III and will instead choose stage II.  It will avoid stage I because this shall involve using the fixed facto

Profit maximisation, b) Discuss the validity in Zimbabwe of the grounds on ...

b) Discuss the validity in Zimbabwe of the grounds on which the profit maximising model of the firm has been defended.

Direct taxes, DIRECT TAXES A direct tax is one where the impact and ...

DIRECT TAXES A direct tax is one where the impact and incidence of the Tax is on the same person e.g. Income Tax, death or estate duty, corporation taxes and capital gains

Monetary theory, Monetary Theory We have seen that Schumpeter theory wh...

Monetary Theory We have seen that Schumpeter theory which runs in terms of innovations and technical change, is at best an incomplete explanation of trade cycle . there are eco

Marrise model od growth, what are the instruments variable of marrise''s mo...

what are the instruments variable of marrise''s model?

Calculate the firms short-run total cost curve, A firm producing hockey sti...

A firm producing hockey sticks has a production function given by X = 2 KL In the short-run, the firm's amount of capital equipment is fixed at K = 1000. The rental rate fo

Explain about isoquant map, Q. Explain about Isoquant Map? We can label...

Q. Explain about Isoquant Map? We can label isoquants in physical units of output without any difficulty. Because every isoquant signifies a specified level of output it's poss

Describe managerial and behavioural theories, Q. Describe Managerial and be...

Q. Describe Managerial and behavioural theories? It was only in 1960s that neo-classical theory of firm was disputed by alternatives like behavioural and managerial theories. M

Priciples, Principles of Managerial Economics points

Principles of Managerial Economics points

Interest rates, Interest rates Decreasing the rate of interest may...

Interest rates Decreasing the rate of interest may not encourage investment but increasing the interest rate tends to lock up liquidity in the financial system.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd