I am looking to develop an understanding of the following question. I don\'t wan

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I am looking to develop an understanding of the following question. I don't want some quick response so that you can get credit for answering the question. If it is explained well then I will leave the appropriate feedback. Quick unanswered questions will receive bad feedback. Please explain it in detail so that I can in turn explain it to others. Thanks,

1. What role does the central banking system play within the global marketplace? Would you recommend any changes to the central banking system? Why or why not?

Explanation / Answer

There are most important role of central bank in word market

In a world in which the credibility of the central bank to keep inflation low is well anchored,

the solvency of most agents is taken for granted and markets are well organised and hence

liquid, interest rates remain low across the whole maturity spectrum and valuations high;

One recommend for changes are central bank should efforts towards price stabilization need to be complemented by governmental fiscal policies and by structural policies to improve the labor and product markets in order to minimize the social costs involved in the process of disinflation.

changes in key rates do not affect inflation expectations that remain low and changes in real

interest rates allow monetary policy decisions to be effectively transmitted to the economy.

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