role of central bank Flashcards
1
Q
role of central bank
A
-implemente monetary policy, act as banker to government (open market ops), act as banker to banks, regulate financial system
2
Q
financial stability importance
A
-crucial for confidence in financial system to remain high: prevent panic and a run on the bank, reduce instability and systemic risk, advise gov of bank bailouts
3
Q
issues of central bank lender of last resort
A
-moral hazard (when risk is taken and there is a negative exernality, other is affected), not hold sufficient liquidity, regulatory capture, why do they have this luxury
