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U.S. Federal Reserve and European Monetary System
US and European Money Systems
US Federal Reserve
With the passage of the Federal Reserve Act, the Congress of the United States of America established the primary monetary objectives of the institution. The primary goals of The Act are as follows: 1) To maximize employment; 2) to foster stable prices; and 3) to establish long-term interest rates. The dual mandate, as it is often called, of the Federal Reserve (aka "The Fed") encompasses the first two of these objectives. The duties of the Federal Reserve have increased over the past several decades and now encompass the following:
Implementing the monetary policy of the U.S.;
Regulating and supervising banking institutions;
Ensuring a stable national financial system;
Providing financial services as a central bank to the U.S. government, domestic depository; institutions, and foreign official institutions;
Researches and publishes about the national economy;
To address the problem of banking panics, in part by supervising and regulating banking institutions;
To strike a balance between private interests of banks and the centralized responsibility of government;
To protect the credit rights of consumers;
To manage the nation's money supply through...
standing in the world economy.
Historically, the main reason that the Federal Reserve System was established was to address the banking panics that were associated with the depression and economic crises. Several other important policy solutions were sought by the Federal Reserve System, including the need to furnish a currency that was more elastic, to re-discount commercial paper, and to ensure that the supervision of domestic banks was more robust than in the past. The years prior to the founding of the Federal Reserve System in the United States saw a number of significant financial crises. Notably, the very severe financial crisis of 1907 was the catalyst for the development of the Federal Reserve System.
European Monetary System
The fundamental objective of the European Monetary System is to maintain price stability within the…
References
European Central Bank. Retreived http://www.ecb.europa.eu
Central Bank Rates. Retrieved http://www.cbrates.com/eurozone
Forex-history.net. Retrieved http://forex-history.net
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Monetary Policy and International Exchange Rate Monetary Policy A factor leading to an increase in a supply of money is a rise in a demand for the bank reserves influencing an increase in the money supply. To prevent a rise in the money supply, the central bank will purchase bonds to increase the quantity of non-borrowed reserves in the economy thereby shifting the amount of money reserves to the right preventing the
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