Central bank independence and economic performance Assignment

Central margin freedom and frugal performance - Assignment ExampleFor instance under the floating exchange footstep regime, protecting the value of the domestic currency against US Dollar and other international currencies calls for vigilance and continuous monitoring of the world economy through different frugal indices. Regulating currency supply and interest place are governed by several domestic and international factors as swell. Therefore, independence of the central bank is necessary to deal with these problems effectively without any interference in the regulatory process. However, the level of independence varies from country to country based on the political and economic system prevailing in the countries. Long ago in 1929 Montagu Norman, Governor of the Bank of England wrote I look upon the Bank as having the unique right to aver advice and to press such advice even to the point of nagging but always, of course, subject to the supreme authority of the government (Toniolo, G. 1988 p. 47). This statement underlines the need for independence as well as its limitation. The role of central bank Central banks monetary policies have different impact on different economic variables of the economy. add in money supply with or without decrease in interest rates could trigger inflation in the economy. Therefore, careful analysis of the economic indicators is great in taking appropriate action by the central bank. For instance, inflation in this case could affect ingestion thereby demand for the products. At the very(prenominal) time, this could increase capital investment and results in employment generation. Stability in exchange rate is another in-chief(postnominal) factor which could affect inflation in the country and foreign direct investments in the country which will have...This paper offers a comprehensive analysis of the role of central bank in damage of economic performance of the nation. Influence of the political independence of centr al bank operations in context of achieving its objectives is under review.In order to achieve economic growth in a country, formation of capital is essential for fresh investments in the economy. Increase in aggregate demand in the country is an important factor in this regard for attracting investment of capital in new projects. Liquidity in the system as well as interest rates should be monitored and regulated on a continuous basis by the central bank to provide good environment for capital investment and consumption which in turn will generate demand for the products. However, the central bank should also ensure that it does not result in overheating of the economy. Regulating interests and money supply in the economic system is very complicated in the backdrop of technological developments taking place in the world and globalisation of economies.The independence of the central bank of the county is very important for exercising control over the commercial banks in the country th rough its monetary policies. The monetary policies need to be complementary to the fiscal policies of the government to achieve its economic objectives. A country with high central bank interference need to introduce reforms to make the creation more independent within the timeframe set for this purpose to improve stability in liquidity and prices.