WOULD IT HAVE BEEN BETTER IF CENTRAL BANKS HAD REMAINED ONLY ISSUING AND DISCOUNT BANKS?

Student: Spînu Iuliana Adriana, Student: Dede Nicoleta
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Student: Spînu Iuliana Adriana, Student: Dede Nicoleta: University of Craiova Faculty of Economics and Business Administration Craiova, Romania

Annals of University of Craiova - Economic Sciences Series, 2011, vol. 4, issue 39, 124-131

Abstract: : Centra banks have started their activities by currency issue and discount operations and have become liquidity providers for the financial and banking system and indiedly for the state.The massive govemamental deficits have increased the dependence of central banks on the states and led to currency issues with no real coverage which have worsened the crisis. However it has been proved that the intervention of central banks as issuing banks is a necessity for achieving financial solvency and ewnomic stabdity and to stop monetary abuses. We balieve that it was better that over lime central banks did not limit the! activity to currency issue but have developed their operations substantially due to the needs imposed by the eœnonic dev&opment By using their own revenues and expenditures, central banks have intervened where it was needed and have tried to offer solutions to ensure the stablity of the econonic systems. Concerning ther monetary policy, it has been proved that a prudent monetary policy is more appropiate than an active policy. The fad that central banks have not always got the expected results is a consequence of the attempt to find optimal solutions by making more accurate predictions of future economic developments. But these have become iieasingIy volatle and uncertain due to lack of an objective value.

Keywords: central banks; credibility; monetary policy; financial solvency; economic stability; inflation expectations. (search for similar items in EconPapers)
Date: 2011
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