what is the main aim of central banks and what are the other aims/roles that are...

what is the main aim of central banks and what are the other aims/roles that are expected to play in case of crises?

Expert Solution

The main aim of a central bank is to decide on the monetary policy of the economy and keeping inflation under certain limits along with keeping the domestic currency exchange rate under certain check if at all the country has implemented a managed floating rate currency regime. Along with this, central banks may be regulations over the payment infrastructure in the country and any such financial institution like banks which have a direct bearing on the monetary system in the country.

During a crisis time, the central banks need to have a proactive role. The most common expectation from the central banks being boosting the economy, this may be on the demand as well as on the supply side. The central bank might undertake this using monetary policy and economic packages. It is also important to provide forward guidance for the market about the macroeconomic conditions. There may also be some sectors for which regulation needs to be modified in order for the better functioning of the economy.

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