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Central Banking: Theory and Practice in Sustaining Monetary and Financial Stability

Book Description

Understand the theories and interpret the actions of modern central banks

Central Banking takes a comprehensive look at the topic of central banking, and provides readers with an understanding and insights into the roles and functions of modern central banks in advanced as well as emerging economies, theories behind their thinking, and actual operations practices. The book takes a systematic approach to the topic, while providing an accessible format and style that is appropriate for general audiences and students with only a minimal macroeconomic background. Theoretical reviews and examples of how the theories are applied in practice are presented in an easy-to-understand manner and serve as a guide for readers to further investigate specific ancillary central banking topics and as a means to make informed judgments about central bank actions. Important topics covered in the book include:

  • Evolution of central banking functions and the international monetary system

  • Theoretical backgrounds that are the foundation to the modern practice of monetary policy

  • Monetary policy regimes, including exchange rate targeting, money supply growth targeting, the risk management approach, inflation targeting, and unconventional monetary policy.

  • Actual practice in market operations and transmission mechanisms of monetary policy

  • The exchange rate and central banking

  • Theoretical backgrounds related to various dimensions of financial stability

  • Current developments with regards to sustaining financial stability

  • The future of central banking in the wake of the 2007-2010 global financial crisis

  • Case studies on relevant practical issues and key concepts in central banking

  • Designed as essential reading for students, market analysts, investors, and central banks' new recruits, Central Banking better positions readers to interpret the actions of central banks and to understand the complexities of their position in the global financial arena.

    Table of Contents

    1. Preface
    2. Acknowledgments
    3. About the Author
    4. Part One: An Introduction to Central Banking
      1. Chapter 1: A Brief Look at Central Banking History
        1. 1.1 Prior to Central Banking
        2. 1.2 Coin Sorting and Storing
        3. 1.3 Banknote Issuance
        4. 1.4 Banker to the Government
        5. 1.5 Banker to Banks
        6. 1.6 Protector of the Financial System: Lender of Last Resort
        7. 1.7 Bank Supervisor
        8. 1.8 Conductor of Monetary Policy
        9. 1.9 The Current Stage of Central Banking
        10. Summary
        11. Key Terms
        12. Questions
        13. Notes
      2. Chapter 2: A Brief Overview of the International Monetary System
        1. 2.1 Evolution of the International Monetary System: Before the end of World War II
        2. 2.2 Evolution of the International Monetary System: The Bretton Woods System
        3. 2.3 After Bretton Woods
        4. 2.4 Going Forward
        5. Summary
        6. Key Terms
        7. Questions
        8. Notes
      3. Chapter 3: Modern Central Banking Roles and Functions: What Exactly Is a Central Bank?
        1. 3.1 Modern Central Banking: An Overview of Roles and Functions
        2. 3.2 To Supervise Banks or Not?
        3. 3.3 So What Exactly is a Modern Central Bank After All?
        4. Summary
        5. Key Terms
        6. Questions
        7. Notes
      4. Chapter 4: A Brief Review of Modern Central Banking Mandates: What Are the Goals That Modern Central Banks Try to Achieve?
        1. 4.1 An Overview of Modern Central Banking Mandates
        2. 4.2 Monetary Stability
        3. 4.3 Financial Stability
        4. 4.4 Full Employment
        5. 4.5 Balancing Among the Three Mandates
        6. Summary
        7. Key Terms
        8. Questions
        9. Notes
    5. Part Two: Monetary Stability
      1. Chapter 5: Theoretical Foundations of the Practice of Modern Monetary Policy
        1. 5.1 An Overview of Theoretical Foundations
        2. 5.2 The Quantity Theory of Money
        3. 5.3 The Phillips Curve
        4. 5.4 The Natural Rate of Unemployment
        5. 5.5 Rational Expectations
        6. 5.6 Time Inconsistency Problem
        7. 5.7 Taking Them All Together
        8. Summary
        9. Key Terms
        10. Questions
        11. Notes
      2. Chapter 6: Monetary Policy Regimes: What Monetary Policy Rules a Central Bank Can Use to Achieve Monetary Stability
        1. 6.1 An Overview of Monetary Policy Rules or Monetary Policy Regimes
        2. 6.2 Exchange Rate Targeting
        3. 6.3 Money Supply Growth Targeting
        4. 6.4 The Risk Management Approach
        5. 6.5 Inflation Targeting
        6. 6.6 Unconventional Monetary Policy
        7. Summary
        8. Key Terms
        9. Questions
        10. Notes
      3. Chapter 7: Monetary Policy Implementation: Financial Market Operations
        1. 7.1 Central Bank Operations in the Financial Market: an Overview
        2. 7.2 Transmission of Money Market Interest Rates to Other Interest Rates in the Economy
        3. 7.3 Monetary Policy and the Yield Curve
        4. Summary
        5. Key Terms
        6. Questions
        7. Notes
      4. Chapter 8: The Monetary Policy Transmission Mechanism: How Changes in Interest Rates Affect Households, Firms, Financial Institutions, Economic Activity, and Inflation
        1. 8.1 Monetary Policy and Households’ Behavior
        2. 8.2 Monetary Policy and Firms’ Behavior
        3. 8.3 Expectations and Second-Round Effects on Household and Firm Behavior
        4. 8.4 Monetary Policy and Financial Institutions
        5. 8.5 Time Lags and Uncertainty in Monetary Policy Transmission
        6. Summary
        7. Key Terms
        8. Questions
        9. Notes
      5. Chapter 9: The Exchange Rate and Central Banking
        1. 9.1 The Exchange Rate, Monetary Stability, Financial Stability, and Macroeconomic Stability
        2. 9.2 Exchange Rate Regimes
        3. 9.3 Exchange Rate Theories
        4. 9.4 Dealing with The Exchange Rate in Practice
        5. Summary
        6. Key Terms
        7. Questions
        8. Notes
    6. Part Three: Financial Stability
      1. Chapter 10: Financial Stability: Definition, Analytical Framework, and Theoretical Foundation
        1. 10.1 Definitions of Financial Stability
        2. 10.2 A Practical Analytical Framework: The Macroeconomy, Financial Institutions, and Financial Markets
        3. 10.3 Financial Stability: Theoretical Foundations
        4. Summary
        5. Key Terms
        6. Questions
        7. Notes
      2. Chapter 11: Financial Stability: Monitoring and Identifying Risks
        1. 11.1 Monitoring and Identifying Risks in the Macroeconomy
        2. 11.2 Monitoring and Identifying Risks to Financial Institutions
        3. 11.3 Financial Markets
        4. Summary
        5. Key Terms
        6. Questions
        7. Notes
      3. Chapter 12: Financial Stability: Intervention Tools
        1. 12.1 The Macroeconomy
        2. 12.2 Financial Institutions
        3. 12.3 Financial Markets
        4. Summary
        5. Key Terms
        6. Questions
        7. Notes
    7. Part Four: Sustaining Monetary and Financial Stability for the Next Era
      1. Chapter 13: Future Challenges for Central Banking
        1. 13.1 The Intensification of Globalization
        2. 13.2 The Continued Evolution in Financial Activities
        3. 13.3 Unfinished Business from the Global Financial Crisis
        4. 13.4 Piecing Them Together
        5. Summary
        6. Key Terms
        7. Questions
        8. Notes
      2. Chapter 14: Future Central Banking Strategy and Its Execution
        1. 14.1 Central Banking Strategy
        2. The Search for New Central Banking Strategy
        3. 14.2 Effective Execution of Central Banking Strategy
        4. 14.3 Epilogue: from the Past to the Present and Beyond
        5. Summary
        6. Key Terms
        7. Questions
        8. Notes
    8. Index
    9. End User License Agreement