Role of Central Banks in a Less and More Developed Economy
In developed nations, central banks conduct a wide range of banking, regulatory, and supervisory functions. They have substantial public responsibilities and a broad array of executive powers. Their major activities can be grouped into five general functions:(1) Issuer of currency and manager of foreign reserves: Central banks print money, distribute notes and coins, intervene in foreign-exchange markets to regulate the national currency's rate of exchange with other currencies, and manage foreign-asset reserves to maintain the external value of the national currency.
(2) Banker to the government: Central banks provide bank deposit and borrowing facilities to the government while simultaneously acting as the government's fiscal agent and underwriter.
(3) Banker to domestic commercial banks: Central banks also provide bank deposit and borrowing facilities to commercial banks and act as a lender of last resort to financially troubled commercial banks.