ABSTRACT
From examining central bank-government relations in Chapter 3 and central bank external activities in Chapter 4, we now turn to various aspects of the central bank’s role vis-à-vis the private sector of the economy. There is a large literature on the relationship between the growth and development of the real economy and of the financial system, with two-way causation (e.g., Cameron 1972; Cameron et al. 1967; Fry 1995; Gerschenkron 1962; Goldsmith 1969; McKinnon 1973; Shaw 1973; World Bank 1989). Central banks in all countries have great concern for the health, development and stability of their payments, banking and financial systems more broadly, including the development of appropriate financial markets in their countries. But the responsibility of central banks in developing countries for the evolution and improvement of such systems in their own countries is even stronger because of their more predominant role within their own country’s financial system, as noted in Chapter 1.
