Feature of the Month: Central Bank's Role in Global Economy

Central banks play an important role in a nation’s economy, and in global trade. While the organizational structure and power varies in different countries, each bank is mainly responsible for controlling its nation’s money supply. In the emerging market economies, central banks consider their main responsibilities as controlling financial stability, while the central banks in advanced economies focus on price stability and set an inflation target in the context of transparent policies. In most countries, central banks act as lenders of last resort to help the banking sector during the time of a financial crisis.

Although managing international trades is not stated as the one of a central bank’s responsibilities, it indirectly influences international trade transactions. For example, international trade transactions in the Nigerian economy are, to a large extent, based on cash. Therefore, the central bank’s currency issue function constitutes a vital part of the trade. International trade would not be properly conducted without the right supply of currency.

The role of central banks is being reshaped following the recent global financial crisis. It has forced the central banks to rethink its functions and instruments. Particularly in advanced economies, the crisis has forced the banks to change the way they conducted monetary policy, and they have started to think about implementing tools to manage nation’s financial stability like the central banks in emerging economies. Central banks have also impacted the previous financial crisis as well. For instance, the dependence of the Bank of Japan on political powers generally contributed to the bubble economy in Japan in the late 1980's. This also brought up the arguments whether central banks should be associated with a nation’s legislative body.

Featured Resources

The Financial Sector Reform and Strengthening (FIRST) Initiative

The Financial Sector Reform and Strengthening (FIRST) Initiative is a $53 million program that supports capacity building and policy development projects in the financial sectors of developing countries. The website shows the different FIRST Initiative projects that are occurring within each country. In addition, events, stories, reports, and online knowledge resources related to the projects are listed in separate sections. Clients may also apply for funding for their individual projects.

Categories: Global , Central Banks , Organizations

 

Executives' Meeting of East Asia Pacific Central Banks (EMEAP)

The Executives' Meeting of East Asia Pacific Central Banks (EMEAP) is a cooperative organization of central banks and monetary authorities in the East Asia and Pacific region. Its mission is to strengthen relationships between member countries. The website lists publications related to economic development and provides other analysis for each member country.

Categories: Organizations , Regional Specific

Featured Academy

Finding Qualified Buyers

This module is the product of a partnership between the U.S. Commercial Service and the Michigan State University Center for International Business Education and Research. This module will cover: U.S. Commercial Service programs to help you find buyers; Department of Commerce agencies to assist you with your exporting needs; state and local government assistance. There is also a case study included on the business SCIFIT Systems Inc.

Categories: Trade Leads , Online Course Modules

 

The Journey from Non-Profits to Major Financial Institutions

The microfinance industry began through individuals and non-profit organizations that wanted to help the poor obtain loans for microenterprises. Today microfinance is a growing industry returning profits to investors and offering basic financial services to the poor. Since its inception, microfinance has expanded and matured in its global reach, legal structures, and product diversity. The sustainability of the industry illustrates that programs designed to promote social equity can evolve into viable business models. Opens in PDF format.

Categories: Financial Services, globalEDGE Business Review