Central bank financial policy

instruments and their impact

to CBs (Commercial banks)
Characteristic of monetary policy
 Monetary policy - the process by which the monetary authority
(CNB) of a country control the supply of money (a rate of
interest for the purpose of promoting economic growth and
stability).

 Goals
* low inflation,
* low unemployment
* trade balance
The banking system and central bank

 Banking system, it usually consists of :

 Central bank
 a large number of commercial banks
 others specialized financial institutions
Main function of the Central bank
 The central bank primarily:
* regulates the money supply,
* set the loan terms
* supervise the activities of commercial banks

 Financial instruments
Financial instruments of CNB
 Discount rate – the rate at which central bank set to banks
some credit

 Central bank credit – credit that CNB provides to commercial

banks

 Operating on the money (free) market – consisting of

securities transactions between the CB and commercial
banks.

 The required minimal reserves - funds that banks must

keep as its non-interest deposit in the central bank
Two basic types of monetary policy
 There are two basic types of monetary policy:

* Expansionary monetary policy – encreases the money

supply and reduce interest rate.

* Restrictive monetary policy – reduce the money supply

and increase interest rate.
Reference
 Zákon č. 6/1993 Sb., about Czech national bank
 SŮVOVÁ, Hana; PAVELKA, František: Specializované bankovnictví, 1.vydání, Praha, Bankovní
institut, 1997, 395 p, ISBN 80-902243-2-6
 REVENDA, Zbyněk, et al.: Peněžní ekonomie a bankovnictví. Vyd. 4. Praha : Management
Press, 2005. 632 s. ISBN 80-7261-132-1.
 ŠENKÝŘOVÁ, Bohuslava, et al: Bankovnitctví II : učebnice. Vyd. 1. Praha : Grada Publishing,
1998. 300 p. ISBN 80-7169-663-3.
 KVIZDA, Martin: Centrální banka a národní hospodářství. Vyd. 1. Brno : MU, 1998. 218 p. ISBN
80-210-1942-5.
 NOVÁČEK, Vnislav; ŠVARCOVÁ, Jena: Makroekonomie I. 2. upravené vydání . Zlín : Univerzita
Tomáše Bati, 2003. 151 p. ISBN 80-7318-155-X.
 DVOŘÁK, Petr. Bankovnictví. Vyd. 3. Praha : VŠE, 1998. 341 p. ISBN 80-7079- 585-9.
 JÍLEK, Josef. Peníze a měnová politika. Vyd. 1. Praha : Grada Publishing, 2004. 744 p. ISBN 80-
247-0769-1.
 RUSMICHOVÁ, Lada, et al. Makroekonomie : základní kurs. Vyd. 3. Slaný : Melandrium, 1995.
204 p. ISBN 80-901801-3-2.
End