Abstract
Central banks evolved in Europe in the seventeenth and eighteenth centuries as centralized monetary authorities that often served the purpose of financing governments. They were instrumental in the transition from classical commodity-backed currencies to the global fiat money system of the present day. The role and functioning of central banks have changed substantially over time. During the classical gold standard, their main responsibility was to store and exchange gold in correspondence to the currencies in circulation. Today, they play a much more active political role in managing the money supply through various policy instruments. They follow different and sometimes conflicting goals, including price stability, stimulation of economic growth, and cutting unemployment rates. A lively debate has arisen on weighing out different policy goals and the proper role of central banking in the economy. This debate does not lack sharp criticisms, both on purely economical and ethical grounds.
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Israel, KF. (2014). Central Bank. In: Backhaus, J. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7883-6_203-1
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DOI: https://doi.org/10.1007/978-1-4614-7883-6_203-1
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