Financial market Essay Example | Topics and Well Written Essays - 3000 words

Financial market - Essay Example In many economic set-ups or regional corporations that have a central bank, the main task of the bank is to ensure that each member’s rate has a considerable level of stability in the pricing of basic commodities by reducing interest rates. Other tasks include the ability of the central bank to act as a central reserve for the currency of the jurisdiction or country and to produce the legal tender used by the same country. Central banks perform several functions. They provide settlement services to large-value payments, act as lenders for the last resort, play a role to oversee banks for the sake of financial stability and monetary policy implementation. These jobs and their operations mode have repeatedly been redefined in order to decide on one specific financial and monetary crisis. In fact, all main stages in central bank functions shaping have been responses to financial and monetary crises. The Composition interpretation and the analysis of these crises are necessary to understand the functions that central banks need to implement and incarnate for a monetary economy to flourish. The origin of central banks as bankers’ banks was in 19th century England. Two conflicting theoretical conceptions of money, the banking principle and the currency principle, implied totally different roles of central banks. The central banks function is to put into effect convertibility of its bills into gold and to be flexible. Such flexibility is more consistent with the principle of banking, whereby money is a debt that financial intermediaries issue as the counterpart to their credit operations. Thus, it is the way of payments of debts issued by competing banks, payment between banks call for a superior bank to settle interbank transactions. This is mainly the role of the money given out by the central bank, money that is designed as legal tender for all debts. Nevertheless, the law cannot impose the trust of the economic agents in central bank money. It is