Central Banking--The Fed

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Central banks are responsible for maintaining the health of the banking system and other financial institutions of a country. They are also responsible for managing the availability of money and interest rates to ensure healthy economic growth and full employment in an economy with price stability. Managing money in the economy is an art as well as a science. Too much money in the economy is likely to cause higher inflation rates. Too little money may cause slow growth and unemployment. In this part of our course we become familiar with the role of central banks in management of money, credit and interest rates, as well as the instruments available to central banks to control the supply of money. More specifically, we will discuss the Federal Reserve System (the central bank of the United States) and will become familiar with its structure and features. The picture to the right is of Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System

www.federalreserve.gov

www.federalreserve.gov/FOMC/BeigeBook/2002/