What is the Central Bank?

The central bank of a country is an entity with a relevant role in a country since it functions as a monetary authority, that is, has the function of issuing the money that is in circulation; In other words, you are in control of legal money. In addition to this function, other political attributions fall on it, since, in most countries where there is a central bank, it regulates and carries out the monetary politics of the state to which it belongs. However, they are public institutions that act completely independently of the government.

What are the functions of the Central Bank?

Among its main attributions, the most important are to regulate the market, stabilize prices and prevent the depreciation of money. A task that they perform thanks to the ability to modify the interest rates. In addition, among other functions, the one to avoid the instability of the financial markets.

To understand how this action is possible, it is necessary to know that a central bank functions as a bank of banks and as the state bank. It is a large bank that has the power to give credits to other banks or even countries whose liquidity she is engaged.

A central bank also has many other functions and most of them carry great weight from an economic point of view:

  • They control the reserves of precious metals (mainly gold).
  • They issue the coins and bills that are in circulation.
  • They set the standards in monetary and price matters.
  • They carry out statistics on the current financial state of a country.
  • They regulate interest rates, among others.

It is all these attributions that make central banks, organs of great influence in the political and economic sphere of a country. Avoiding at all costs that there is no inflation no problems in the credit and financial system.

The monetary authority of the Euro is the European Central Bank, whose functions are based on managing the currency and controlling its price so that it does not negatively affect the European economy.

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