ILO:
a) Key functions of central banks:
o implementation of monetary policy
o banker to the government
o banker to the banks – lender of last resort
o role in regulation of the banking industry
a) Key functions of central banks:
o implementation of monetary policy
o banker to the government
o banker to the banks – lender of last resort
o role in regulation of the banking industry
Central Banks
Implementation of monetary policy:
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Assess the success of the central bank during the 2008 financial crisis based upon your existing knowledge of their policies?
Bank of England and the effects of QE
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How important a role is monetary policy in supporting the UK economy during and after covid?
Unemployment predicted to surge to 2.6m by mid-2021
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QE
Watch the videos and explain how QE would impact macro objectives through an appropriate diagram.
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Quantitative Easing - How It Works
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Central Banks in the Great Depression
How did the central bank approach differ in the Great Depression?
Why did it take such a different approach? |
What was the outcome of their approach? How did this influence the 2008 financial crisis? Additional reading: What is the Gold Standard? |
The videos provide an insight into aspects of the great depression.
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The Great Depression
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A Monetarist's explanation of the cause of Great Depression
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Banker to the government:
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See theory sheet
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Banker to the banks – lender of last resort & regulation:
When a financially troubled bank gets into short-term difficulties and is unable to raise enough cash, the central bank will lend to them to provide the liquidity needed. The reason for this is to preserve the stability of the banking and financial system so that a run on a panic-ridden bank is prevented and individuals’ deposits are protected.
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The role of the Bank of England - Part 5: The Money Go Round
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The role of the Bank of England - Part 6: Keeping Confidence
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Role in regulation of the banking industry:
Not all central banks may be financial regulators – this varies from country to country
What is the intervention within the UK?
What is the intervention within the UK?
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A new approach to financial supervision: the Prudential Regulation Authority
What is stress testing?
UK banks prepare for a new world | Lex
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Why would regulating banks lending be important too?
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Since the financial crisis
Assess if changes to financial markets have been enough to prevent another crisis in the future?
Revision webinar
Watch the revision webinars to consolidate your understanding and apply what you've learnt.
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Role of the Central Bank
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Monetary Policy in the UK
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Monetary Policy - Evaluation: Alternative Monetary Policies | Economics Revision
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Essay question
Using a country of your choice and your own knowledge, evaluate if providing substantial Government support to banks is the best policy response during a financial crisis? (25 marks)