chapter  2
22 Pages


The central bank in the Federal Republic of Germany is the Deutsche Bundesbank, founded on 26 July 1957 with i t s head office in Frankfurt. To an extent that cer ta inly dist inguishes the Federal Republic from most other Western indus t r ia l nat ions, the Bundesbank exerts a profound influence upon the monetary and financial system of the German economy and above a l l on monetary and financial policy in the Federal Republic. There are two reasons for the pa r t i cu la r significance that the Bundesbank has assumed. The f i r s t is the re la t ive ly high degree of autonomy i t possesses v is -a-v is the government and the private economy, which has made an essen t ia l contribution to the achievement of a domestic rate of inf la t ion that is low by in ternat ional standards. The second i s a resu l t of a rapid, external ly - orientated growth of the German economy af ter the Second World War, a growth that would have been inconceivable without the existence of an ef f ic ient central bank whose ac t iv i ty was heavily influenced by the development of the in ternat ional monetarysystem. If these two features of the Bundesbank and i t s pol ic ies are to be fully understood, i t i s f i r s t of a l l necessary to br ief ly outl ine the history of i t s origins before i t s functions and organisation are discussed in d e t a i l .